Bunnings UK & Ireland: “Homebase acquisition below our expectations”

Wesfarmers brought Bunnings to Britain and Ireland in 2017 following its Homebase buy-out the year before, but the Australia-headquartered business has now expressed its disappointment at the sales performance so far.

Bunnings UK and Ireland (BUKI) is under review to identify actions to improve returns – and to evaluate the performance of Bunnings’ pilot stores.

BUKI is expected to announce an underlying loss of £97 million ($165m) for H1 2018, reflecting Homebase’s poor trading performance.

“The Homebase acquisition has been below our expectations which is obviously disappointing,” said Wesfarmers MD Rob Scott. “In light of this, a review of BUKI has commenced to identify the actions required to improve shareholder returns.”

Rapid and significant changes to Homebase – including ditching non-core categories and concessions – led to larger than expected losses, Wesfarmers said. Weak trading over the latter part of the H1 2018 has compounded Bunnings’ issues.

Despite the bad news for Bunnings, plans are still being developed for “a broader conversion to Bunnings” with strong local expertise being brought in.

Bunnings Group Managing Director Michael Schneider said: “Through the pilot program, we have identified ways to reduce the capital expenditure and duration of the conversions. As a result, we are reviewing plans for the roll-out of Bunnings across the network, which will include a small store format in addition to the warehouse format.

“We will continue to monitor the profitability of the first tranche of pilot stores over the remainder of the 2018 financial year. Achieving proof of concept for the Bunnings format is a precursor to executing a broader roll-out plan.”

Thanks to the poor performance, media reports are indicating that up to 2,000 Bunnings jobs are in the balance as Wesfarmers evaluates BUKI. If so, Bunnings Employees may have to wait until the Strategy Briefing Day in June for further details.