HOME IMPROVEMENT STRONG IN WESFARMERS' FY2017 NUMBERS

By NZHJ August 18, 2017 Industry news

Bunnings ANZ starred again in Wesfarmers' mixed bag FY2017 year end result, with BUKI still a work in progress.

Wesfarmers this morning released its FY2017 year end result, again including a mixed bag of numbers.

Overall, however, Wesfarmers’ Home Improvement (HI) segment – comprising Bunnings Australia & New Zealand (BANZ) and now Bunnings United Kingdom & Ireland (BUKI) – fared well:

 

FY2016

FY2017

 

 

BANZ revenue (AU$m)

10,575

11,514

+8.9%

 

BANZ EBIT (AU$m)

1,213

1,334

+10%

 

BUKI revenue (AU$m)

996

2,072

/

 

BUKI EBIT (AU$m)

/

(89)

/

 

Total HI revenue (AU$m)

11,571

13,586

+17.4%

 

Overall HI EBIT (AU$m)

1,214

1,245

+2.6%

 

 

BANZ overcomes "mixed conditions"

In the face of “mixed trading conditions” - “adverse weather and competitor liquidation activity” - Bunnings Australia & New Zealand (BANZ) fared well.

Revenue from BANZ was +8.9% with total store sales +8.9% and store-on-store sales +7.3%.

The BANZ EBIT was also +10% on last year.

Total BANZ sales in Q4 in particular were strong at +11.4% and total store sales +11.7%, with store-on-store sales also strong at +10.4%.

Gains from “disciplined cost control” and property divestment in “continued favourable market conditions” were somewhat offset by higher store closure provisions.

These arose from the agreement with Home Consortium for new sites and also additional H2 write-downs “related to future network changes” and in-store display assets.

In terms of an outlook for BANZ, reading between the lines, look out for even sharper pricing:

“Positive trading momentum is expected to continue in the 2018 financial year, supported by ongoing investments in lower prices to deliver more customer value, ongoing range innovation and increased customer service.”

Bunnings New Zealand's figures were not presented separately from the BANZ figures.

 

BUKI's tough first full year....

In a tough first full financial year since acquisition, Bunnings United Kingdom & Ireland (BUKI / Homebase) reported operating revenue of £1,229m (AU$2,072m) and a loss before interest and tax of £54m (AU$89m).

The result included £19m (AU$33m) in cost associated with disruptive but unavoidable costs around the transition and restructuring and the establishment of the Bunnings brand and pilot store roll-out.

Thanks to “price deflation and declines experienced across the higher value kitchen and bathroom categories”, total BUKI sales were –6.8% in Q4 with store-on-store sales also down (–4.3%), despite positive transaction numbers (+3.2%).

Still, says Wesfarmers, BUKI’s initial performance has been “encouraging” across its 255 Homebase and pilot Bunnings Warehouse stores (15-20 of which are expected to be trading or nearing completion by the end of this year).

Part of this optimism will be due to the planned relaunch of the kitchen and bathroom offers, but fundamentally the belief is that rolling out the Bunnings brand and format is the make or break of all this.

“Long-term success” is “predicated on the broad roll-out of the Bunnings format”, insists Wesfarmers, adding that the “historical poor performance of Homebase is expected to continue in the short term” until punters adjust to the new offer.

What's more, warns Wesfarmers, until the Bunnings roll-out "reaches sufficient scale", BUKI's performance will "continue to be negatively affected by disproportionate non-operating costs and disruptions associated with new store openings."

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