The value of the Masters hardware business just fell for Woolworths again

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Lowe’s, the US retailer, has cut the value of its one-third investment in the troubled Woolworths Masters hardware business by more than half to $US530 million.

If Lowe’s estimate is correct, then Woolworths’ investment is down $US1.06 billion ($A1.47 billion) in value. Woolworths already has accumulated losses of more than $A600 million on the hardware business.

In early trade today, Woolworths shares were down 1.4% to $22.01.

Woolworths is also trailing its main competitor Coles in a supermarket business already under attack by discount chains such as Aldi. Woolworths is reporting flat results.

Woolworths has decided to sell Masters, not wanting to continue to lose $A200 million a year trying to break into the hardware business against Bunnings, the market leader which makes significant profits for its owner Wesfarmers.

Lowe’s has notified Woolworths it wants to exit the joint venture after investing about $US930 million.

Overnight the US retailer booked a $530 million non-cash impairment charge against the investment, including the cumulative impact of a strengthening US dollar .

“The decision to exit the joint venture in Australia was made as part of the company’s ongoing analysis of its portfolio of businesses,” Lowe’s told the market.

About $A3.48 billion has been put into the hardware joint venture since 2009. The value of the business to another player is unknown but some analysts believe it could fetch just $A600 million.

Fairfax Media reports that Lowe’s action today has set the scene for legal action against Woolworths.

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