Woolworths has finally made the decision to offload its poor performing brand, Masters Home Improvements, after sales continue to fall. In what was an attempt to rival Wesfarmers brand, Bunnings, the Maters business failed to take off, and Woolworths has been struggling to sustain ongoing losses. On another note, it’s rival Wesfarmers has confirmed expansion of its business to the UK with the purchase of Homebase for 340 million Pounds, which is around $705 million.
Recent article source from abc news;
The decision unravels a strategy to enter home improvement which was driven by chief executive Grant O’Brien who announced his retirement late last year. The exit process will involve Woolworths buying back a 33.3 percent interest in the venture held by WDR Delaware Corporation, which is a subsidiary of Lowe’s Companies. The anticipated sale comes after a shareholder revolt saw Gordon Cairns appointed as Woolworths chairman and former chief executive Roger Corbett brought back as a special consultant. Mr Cairns said his top priority as chairman has been to determine the future of the home improvement joint venture. “Our recent review of operating performance indicates it will take many years for Masters to become profitable. We have determined we cannot continue to sustain ongoing losses from this business,” Mr Cairns said in a statement. The business will continue to trade through this period. Our top priority is to do the right thing by all stakeholders. We intend to pursue an orderly prospective sale or wind-up of the business. This enables full ownership of the business by Woolworths in a shorter timeframe and gives us access to the widest range of exit options.” Mr Cairns said the decision to exit the home improvement business will allow the retailer to focus on strengthening the rest of the business.
However, he signalled the process of unravelling the Lowes relationship though the use of “put” and “call” options would be complicated and time consuming. “Whilst we will move as quickly as possible, the put and call options process will take at least two months to complete and following this a potential sale process or other exit process will take additional time,” Mr Cairns cautioned. “The business will continue to trade through this period. Our top priority is to do the right thing by all stakeholders.” Shareholders appear to approve of the move, with Woolworths defying a steep share market slide to post a 4.8 per cent gain to $23.74 by 11:06am (AEDT).
At the same time, rival Wesfarmers is expanding its hardware business by confirming the purchase of UK retailer Homebase for 340 million pounds, or around $705 million. Wesfarmers confirmed last week that it had made an offer for Homebase, the UK’s second-largest hardware chain. Homebase has 265 stores in the UK and Ireland, and Wesfarmers is planning to build the Bunnings brand in the UK over the next three to five years. “The 38 billion pound UK home improvement and garden market is a large and growing market with strong fundamentals,” said Wesfarmers managing director Richard Goyder in a statement.”The Bunnings team has done a lot of work to make sure it understands the market and the opportunity, including having visited hundreds of stores, spending significant time researching the market and closely studying international retail expansions into the UK and other markets.” Wesfarmers shares were up 3.7 per cent to $40.77 by 11:06am (AEDT), but the gains were more related to Woolworths’ decision to exit its Masters hardware venture which is a direct rival to Bunnings in Australia.
Source: abc news – http://www.abc.net.au/news/2016-01-18/woolworths-to-exit-masters-hardware/7094858
Comment