Woolworths has announced that it plans to sell or close its Masters hardware chain, whilst Coles' parent Wesfarmers has announced the international expansion of its Bunnings hardware chain.
Sale of Masters due to losses and challenging outlook
Masters was established in 2011 as part of a joint venture with US hardware chain Lowe's and has grown to 58 stores. However, following continued losses and a recent review that the business would not become profitable for a number of years, both retailers have decided that they cannot sustain the on going losses. Woolworths aims to buy Lowe's 33.3% share in the business, before looking for a suitable buyer. The stores will remain trading during this period and only close if a purchaser cannot be found.
Woolworths will focus attention back on core business
Woolworths will hope that the sale of Masters will have two positive consequences. Firstly, after losses of more than AU$600m over the past six years the disposal of the business will reduce the significant drag that this has caused on the financial performance of the Woolworths group. More importantly, it will also allow the retailer to focus more attention and investment on its core supermarket business, which in recent quarters has lost momentum compared to its key competitors.
Wesfarmers to expand Bunnings at home and abroad
Masters was set up to take on Wesfarmers Bunnings hardware business, however whilst Woolworths exits the market, Bunnings is looking to export the business to the UK and Ireland through the acquisition of 265 Homebase stores. The move will see Bunnings invest AU$1,037m (£500m) over the next three to five years and rebrand stores under the new umbrella. Wesfarmers also plans to continue expanding Bunnings at home, with 15-18 new stores planned in Australia over the next two years.