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In a double twist of fate, Woolworths announced its decision to offload home improvement and hardware chain Masters, at the same time rival Wesfarmers revealed its DIY expansion with an offer for Homebase, the UK’s second-largest hardware chain.
Woolworths ASX announcement showed it intends to exercise a call out option over US-based Hydrox Holdings Pty Limited held by WDR Delaware Corporation, which is a subsidiary of US company Lowe’s and operates Masters Homes Improvement and Home Timber and Hardware.
“Our recent review of operating performance indicates it will take many years for Masters to become profitable,” Woolworths chairman Gordon Chains, said. “As a result of our engagement with Loew’s, it has advised that it intends to exercise the put option which is available to it under the joint venture agreement.”
The exit process will involve Woolworths buying back a 33.3 per cent interest in the Hydrox venture and will involve negotiation with Lowe’s as well as an independent expert valuation process. Cairns said Woolworths intends to pursue an ‘orderly prospective sale or wind-up of the business.’
“This enables full ownership of the business by Woolworths in a shorter timeframe and gives us access to the widest range of exit options,” he said. “This important decision allows Woolworths to focus its energy and resources on strengthening its plans in our other businesses.”
According to futurist Chris Riddell, Masters failing was quite simply down to customer experience.
"There just wasn’t any," he said. "Canstar Blue published some of the surveys recently conducted, and the comments were overwhelmingly negative about staff being untrained, unhelpful and at worst just not there to even speak to."
He added the announcement signals that the days of stack it high and sell it cheap are well and truly over.
"Masters recent announcement of it finally admitting defeat in the highly competitive market of bricks and mortar retail is no surprise," he said. "The cost of doing business on the ‘high street’ in Australia is at an all-time high, and you can’t win the battle of getting customers in by just throwing money at the problem. Customers are more demanding today than ever, and they are more savvy with the advent of social media and online shopping."
Meanwhile at the same time, rival group, Wesfarmers, confirmed its 100 per cent acquisition of UK home improvement and garden retailer, Homebase, for 340 million pounds, or approximately $705 million.
In a statement released to the stock exchange, Westfarmers announced the rationale behind the acquisition was the attractive and growing UK home improvement and garden market, which is currently worth around 38 billion pounds.
Wesfarmers revealed the first step in its program includes investment in the Homebase team and reinvigoration of core assets, building an exciting Bunnings-branded business over three to five years across the 265 stores currently across the UK and Ireland.
"The 38 billion pound UK home improvement and garden market is a large and growing market with strong fundamentals," Wesfarmers managing director, Richard Goyder, said. "The Bunnings team has done a lot of work to make sure it understands the market and the opportunity, including having visited hundreds of stores, spending significant time researching the market and closely studying international retail expansions into the UK and other markets."
According to Riddell, when it comes to the competitive edge in terms of customer experience and loyalty, Bunnings has a clear win.
"Any store that wants to entice customers in, and more important gain loyalty and repeat business has to focus on the holy grail of creating experiences and treating the customers with respect," he said. "Customers today want to feel like they’re going somewhere that is giving them value, and the experience matches their expectations.
"This is where Bunnings has a clear win. The staff are well trained, they are knowledgeable, and they have a passion for the Bunnings brand. Employees of Bunnings are actually not really employees. They’re part of the fundamental DNA that makes Bunnings who they are. They’re passionate, knowledgeable and they live for the brand. It’s the future of retail, and it’s how experiences are created."