BUNNINGS’ ANZ FIRST QUARTER CAUSE FOR CONCERN?

By NZHJ November 03, 2016 Industry news

Wesfarmers attracts attention with "softening" sales in the first quarter of FY2017.

Wesfarmers' Q1 FY2017 result released at the end of last month was headlined by a softening of food and liquor interests and had the Ocker analysts worrying about lower than usual growth.

Harvey Norman's Q1 figures attracted the same sort of attention.

Overblown or not, Bunnings' ANZ total first quarter sales growth of +7.4% and store on store growth +5.5% do pale in comparison to the strong sales growth in the same quarter of previous years of +11% and +11.6% in FY2015 and 2016 respectively.

Sales (AU$m)                   FY2016    FY2017                      

Bunnings ANZ                   2,476        2,659     +7.4%

Bunnings UK & Ireland   N/A          554        N/A

What are the root causes of what the analysts are taking as a sub-par performance?

At the same time as highlighting the “pleasing growth” experienced in New Zealand (which is as far as the NZ territory is broken out this time), Wesfarmers MD Richard Goyder cited an “impact” on the result from the Masters stock liquidation as well as wetter and cooler weather than normal.

Looking to Wesfarmers’ northern hemisphere interests, after the first seven months of ownership, the Bunnings UK & Ireland result was “in line with expectations”.

Clearly still a work in progress as new pricing, marketing and operational changes roll out and as core ranges are refocused the first quarter’s +8.4% increase in transactions on a like for like basis at the still Homebase-branded network may be taken as a positive at this point.

Still, at the Q1 announcement, Home Improvement MD John Gillam said there was still a “hell of a lot to do” before becoming a fully-fledged, Bunnings branded business in the UK.

Other Homebase news is that the 22 Laura Ashley homeware concessions within Homebase stores will close by mid-2017. Was it a worthwhile venture?

Possibly not: “The company does not expect there to be a material impact on the group,” said Laura Ashley of the changes on the London Stock Exchange.

As part of the previous Homebase owner and now Sainsbury-owned Home Retail Group, Habitat concession stores within Homebase have of course already closed.

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