Bunnings is bringing in strong revenue growth for Wesfarmers and there’s more on the horizon from the hardware business.
Home improvement is the stand out division within Wesfarmers, Australia’s biggest private employer. Revenue for the year to June jumped 21% to $11.57 billion.
EBIT (earnings before interest and tax) increased 11.6% to $1.21 billion, second only to the supermarket business unit Coles which reported earnings of $1.86 billion but growth of only 4.3%.
Profitability is superior. The return on capital at Bunnings in Australia is 36.6% while Coles manages just 11.2%.
Homebase, the recent acquisition in the UK, contributed four months to the results. Sales from the UK were £512 million ($A986 million) and earnings after restructuring costs £0.5 million ($A1 million).
“Sales growth was achieved across all areas of the business following the delivery of greater digital and physical brand reach, continued commercial expansion and increased customer value,” says CEO Richard Goyder.
The numbers in detail:
Bunnings Australia and New Zealand has 11.1% total sales growth and store-on-store sales growth of 8.1%. There are 244 warehouses, 70 smaller format stores and 33 trade centres in the local Bunnings network
Wesfarmers is moving in on the home improvement business in the UK using the Bunnings brand, and business formula, from Australia.
Part of the move is to use the newly acquired Homebase, the British home improvement retailer and garden centre, which it acquire for £340 million ($705 million) from Home Retail Group.
The basic plan is to turn Homebase, with its premium prices and low promotion budget, into a Bunnings branded network in three to five years with Australian-flavoured warehouse low prices.
“Since the acquisition of Homebase, good progress has been made to reshape the business, with results in line with the acquisition plans,” Goyder says
“The group is confident that the acquisition will deliver long-term value for shareholders.”