Bunnings could save over £200m if it exited the UK

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Bunnings

Bunnings would be hundreds of millions of pounds better off if it pulled out of the UK and cancelled its plagued launch into the market, according to new research.

A report from financial giant JP Morgan has suggested that Wesfarmers, the Australian company which owns Bunnings, would be better off cutting its losses as its UK operations continue to underperform.

The company bought home and DIY retailer Homebase in 2015 and has since been pushing to break into the UK market, converting its estate to the Bunnings fascia along the way.

After reporting losses of £97 million amid its interim results last month, alongside a further £454 million impairment charge, JP Morgan has stated that leaving the UK would be the “least bad outcome” for Wesfarmers.

In the report, three possible scenarios were assessed.

The first was remaining on its current trajectory and persevering with breaking into the market, which was estimated to cost around £863.4 million. This assumed losses from diminishing trading of around £88 million this year.

The second was to cut its losses and exit the UK entirely, estimated to cost around £631 million, including a similar £87.8 million in trading losses for 2018, but offset by around £150 million in proceeds from inventory.

Its third proposed option suggested retaining the 24 already converted Bunnings stores and selling off the remaining Homebase estate, although this would incur large one-off costs due to sudden losses of scale and sourcing costs.

This comes as the company’s leadership is carrying out a strategic review, with the results expected to be announced on June 7.

It is understood that the recent harsh weather conditions mean this could be delayed.

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