Woolworths in Australia is abandoning its multi-billion dollar home improvement arm, but a local retail expert says the retailers in New Zealand’s market are more evenly matched. Source: Stuff co nz
Woolworths says it is looking to either sell or wind up its struggling home improvement business, which includes the Masters home improvement and Home Timber & Hardware chains.
Chairman Gordon Cairns said the retailer’s recent review of the business indicates it will take many years for Masters to become profitable.
“We have determined we cannot continue to sustain ongoing losses from this business,” he said in a statement. “We intend to pursue an orderly prospective sale or wind-up of the business.”
Chris Wilkinson, director of retail consultancy First Retail Group in New Zealand, said the news highlighted “the very challenging times for retail in general in Australia”.
He said Bunnings, which is also present in New Zealand, was the dominant player in Australia’s home improvement market. But its rival in New Zealand, Mitre 10, had had “real foresight in taking Bunnings on early and advocating its members committed to its big format stores”.
“This has paid dividends and the chain is a real challenger for Bunnings here,” Mr Wilkinson said.
“In Australia there isn’t that challenger, which has helped them achieve a highly dominant position with both consumers and suppliers.”
Mr Wilkinson said Bunnings’ strength was in vendor management with unique relationships that help minimise stock holding costs.
This would “no doubt” be a key part in its recently announced plans to move into Britain.
Bunnings’ owner, Wesfarmers, has agreed to buy 265 Homebase stores for £340 million ($NZ750.6 million) from Britain’s Home Retail with plans to rebrand the chain as Bunnings.
“Bunnings already have massive scale in terms of managing their stores and strategy from the mothership in Australia,” Mr Wilkinson said
“I’d expect they would leverage this in the UK.”
Mr Cairns said the decision would allow the company to focus on strengthening its core businesses, including its supermarket chain, which faces stiff competition from Coles and Aldi.
Woolworths cannot exit Masters without taking full control of the business so it will buy out its joint venture partner, US-based Lowe’s, which holds a third stake.
