Bunnings/Homebase UK sees £54m loss

Sales at Bunnings in Australia grew 8.9%, helping increase earnings 10% to $1.3 billion but the DIY/garden centre chain's expansion into Britain and Ireland after buying Homebase in 2016 saw a £54 million annual loss.

Revenue for the year ending 30 June 2017 at Bunnings UK and Ireland was £1,229m. Loss before interest and tax was £54m in Bunnings' first full year of ownership.

There was £19m ($33m) transition & restructure costs, including concession exits and pilot store programme.
Quarter four 2017 sales decreased 6.8% in local currency terms with store-on-store sales declining 4.3% despite transaction numbers increasing 3.2%.
Wesfarmers, which revealed the Bunnings UK and Ireland results as part of its annual full year results, bought Homebase in February 2016 for £340m and is converting stores into its Bunnings brand, with two in St Albans, plus Hemel Hempstead and Milton Keynes opening first. Four stores in Kent followed and Somerset is next. There are 255 Homebases.
"Significant disruption" is impacting performance as Homebase repositioning continues with kitchen and bathroom in transition.
There was inconsistent store execution as Bunnings exited non-core products, built high-performance culture, ceased install & in-home service and opened four Bunnings Warehouse pilots.
The owners reported strong supplier support and positive customer feedback.
Plans are to continue to build strong foundations, strengthen leadership team, realign organisational structures, relaunch and rollout kitchen & bathroom offers
There will be 15 to 20 pilot stores by 31 December 2017, subject to approvals, with further investment predicated on successful pilots.
Bunnings said: "Business remains in the very early stages of formation. Trading is challenging as customers continue to adjust to the new offer in Homebase."
There is a "disproportionate impact of non-operating costs & disruptions associated with new store openings until the Bunnings roll-out achieves sufficient scale".
Wesfarmers Richard Goyder said: "While significant transition, separation and integration activity
was undertaken throughout the year to progress the acquisition agenda, the volume and pace of repositioning Homebase affected store execution and consequently trading performance. The first four Bunnings pilot stores were opened during the year, and early indications are that the format is resonating well with customers."
Merrill Lynch analyst David Errington suggested there was a "risk of disaster" and questioned the UK's understanding of everyday low prices and the loss recorded. 
Bunnings managing director Michael Schneider said he had been in the UK and that change was "going to be a long slog" for "customers to understand what the stores are there for".
Goyder said appointments of David Haydon and Damien McGloughlin, both of whom have worked for B&Q, strengthened the UK team.
Wesfarmers incoming chief executive Rob Scott has been in the UK with Schneider in the last six months and said there is "an opportunity to build a successful and profitable business over a five year timeframe". He said there was a "challenge" but the new offer was "resonating" with customers and Milton Keynes and Folkestone had shown "pleasing" white van man trade sales. Range of offer is also an "opportunity". He said he was "not satisfied on resturns in BUKI" but that BUKI was only 3% of capital employed by Wesfarmers.
Wesfarmers said there was "a logic" in converting Homebases into Bunnings in the winter to be ready for spring/summer peak trading.

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