Australian hardware retailers shake-up: Woolworths exits from Masters, Wesfarmers expands Bunnings to the UK

By @chelean on
A Woolworths Ltd sign hangs above the entrance of a store in Sydney, Australia June 18, 2015.
A Woolworths Ltd sign hangs above the entrance of a store in Sydney, Australia June 18, 2015. Reuters/David Gray

There is quite a movement in the Australian hardware retail sector on Monday as Woolworths announced it was letting go of Masters, while Wesfarmers is expanding Bunnings in the UK in a $700 million deal with Homebase.

In a move that was perhaps already expected, Woolworths (ASX:WOW) said it is exiting the home improvement industry and will let go of its 63 Masters Home Improvement stores, as well as its Home Timber & Hardware business.

Customers need not worry, though, as Woolworths assured them that Masters would continue to trade normally until the offloading process, which is expected to take several months, ends.

“Woolworths will honour all gift certificates, product warranties, returns and lay-bys and the completion of any contracted home improvement projects such as kitchens, bathrooms and floor coverings. Any gift cards can already be used at other Woolworths group stores,” the announcement on the Masters (ASX:WES) website read.

Woolworths did not say if it would sell Masters or close it down.

10,000 jobs at risk

If it decided to go with the latter, 10,000 employees would be left jobless. Retail union Shop, Distributive and Allied Employees Association (SDA) said that the employees were devastated after hearing the news. Woolworths assured the union, however, that the preferred outcome would be Masters’ sale instead of its closure.

“If this is achieved, the SDA will promptly engage the new owners on behalf of our members,” SDA national secretary Gerard Dwyer was quoted by the Sydney Morning Herald as saying. However, if sale is not possible, the union will assist in the redeployment of the employees.

Masters has been underperforming since it entered the Australian market in 2011. Woolworths and US partner Lowe’s invested almost $3 billion in the hardware chain. However, instead of gaining, it even accumulated losses of $500 million.

Bunnings expands to the UK

On the other end of the spectrum, rival Bunnings will be expanding to the UK after adding 29 locations in Australia last year. Parent company Wesfarmers has announced closing a detail with Home Retail Group for £340 million ($705 million) to buy Homebase, the second biggest British home improvement and garden retailer in the UK and Ireland.

The plan is to turn Homebase into a Bunnings-branded business over three to five years. The acquisition is expected to complete in the first quarter of the year. Homebase currently has 265 stores and had reported £1,461.2 million ($3,017.79 million) revenue for the year ending August 2015.

Woolworths climbed at $23.64 at the ASX on Monday following the news, while Wesfarmers was up at $40.21.