Bunnings: Profitability of Homebase stores in May "not as anticipated"

Bunnings say it has experienced "significant disruption across all areas of the business" since it bought UK DIY/garden centre chain Homebase in January 2016 for £340m.

Wesfarmers managing director Richard Goyder said Bunnings UK will still make losses throughout 2017 and for the first half of 2018 given current trading and seasonality.

May trading had not been as good as hoped in making up losses from previous months because of "lousy weather" and ongoing issues with kitchen and bathroom offer repositioning that are "hurting us".

April, May and June are "important" because of "gardens particularly", and will be profitable, but "not as we would have anticipated".

He said, at a Wesfarmers Strategy Briefing Day in Sydney, Australia, on June 7, that staffing is an issue that could limit rolling out new stores after the 10 planned for 2017.

Former owner Home Retail Group had "under-invested in people" meaning it had taken longer to make changes. Bunnings has replaced "a number" of UK store managers.

Revenue at Homebase in the second half of 2016, reported in February, was £612m, with £28m losses, inclusive of £13m ($21m) restructuring and repositioning costs. Restructuring costs given at the strategy day were put at £16m ($26m).

Bunnings reported a BUKI retail basics focus on core business and customer with a widened product choice and increased stock depth at the 255 stores. He said Bunnings had given staff 67,000 hours of training.

There are two pilot stores trading (both in St Albans) another to open on 9 June (Hemel Hempstead). It is "early days but both St Albans stores are trading well" with "encouraging responses from suppliers, customers and team members".

The Bunnings UK and Ireland outlook is for a total of four pilots by 30 June 2017 (with a fourth in Milton Keynes near the UK HQ is) and 10 pilots by the end of 2017 (Folkestone and Sittingbourne have been revealed). If they show return on capital, good customer numbers, good sales, good margins and correct operating costs, the roll out will go ahead.

Bunnings said "successful pilots are an absolute precursor to further investment", concession removals will continue, the "taking of first steps" towards introducing a BUKI digital eco-system (a transactional website which has been ruled out in Australia as unprofitable), "building trust" and  "long-term process to build deeper customer involvement and engagement".

Bunnings board will visit the UK this summer to visit their stores and those of other retailers.


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