Bunnings’ Australian parent company Wesfarmers has announced a major writedown of its UK operation, in what is being viewed as “terrible news for shareholders”.
This morning Wesfarmer’s managing director Rob Scott unveiled a AUD $1 billion (£560 million) writedown of Bunnings UK and Ireland (BUKI), a sum larger than that AUD $750 million (£422 million) it originally paid for the business.
The news has sparked speculation that the retailer could abort efforts to break into the UK market as early as June.
After purchasing the UK-based garden and DIY retailer Homebase in February 2016, Bunnings has been attempting to transfer its business model here to the UK, slowly rebranding Homebase stores to the new Bunnings fascia.
This has proven difficult, reporting a 13.8 per cent drop in sales in the UK to £267 million during its first quarter in October last year.
It also said it expects underlying losses for its latest half year to hit AUD $165 million (£93 million), more than double the losses seen in all of 2017.
In efforts to put the breaks on losses, Scott has reportedly earmarked up to 40 underperforming Homebase stores for closure – placing around 2000 jobs at risk.
Scott is not ruling out a complete retreat from the UK, stating that “all options” were still on the table.
“I appreciate what we’ve disclosed today is terrible news, terrible news for shareholders,” Scott said.
“To shut the door on this today would be incredibly damaging to shareholders, particularly where the current level of losses are.
“This business was profitable two years ago, so we know that there is the capacity within this network when things are working to generate profitability.”
According to Citi analyst Bryan Raymond, the news has reinforced expectations that “the new senior management team will announce an exit from Bunnings UK over the next twelve months”.