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Wesfarmers appoint ex. Masters MD to support Homebase

Homebase store sign

It was announced earlier this morning at the Wesfarmers 2016 Strategy briefing, that they have hired Matt Tyson, the former Masters MD and CEO of Castorama Russia, to help with the turnaround of the Homebase business.

During the media presentation, Bunnings  CEO John Gillam outlined a new three-man advisory team to support Homebase and guide its planned growth in the UK. The team of three including Matt Tyson and headed up by the 'turnaround king' Archie Norman, also includes a former McKinsey & Company partner Michael Mire. “We’ve drafted in a lot of powerful people to help us get things right,” Mr Gillam said.

This decision comes as a surprise to many, as it was only in February that Tyson stepped down from his role as MD of Masters, following the Lowes/Woolworths decision to withdraw from the Australian market. During his two year tenure at Masters, he battled to turnaround the ailing business, under growing investor pressure.

Read 'Masters CEO leaves the business'.

He joined Woolworths after more than twenty years with Kingfisher, including his most recent job as chief executive of Castorama, in Russia. Gilliam said “He knows Bunnings well (and) he is also a very well-credentialed UK retailer."

The strategy day provided Bunnings’ Mr Gillam the opportunity to defend the group’s £340m purchase of Homebase in January 2016, after Bank of America Merrill Lynch analyst David Errington recently questioned the strategy. Here at Insight DIY, we have also questioned their ability to successfully deliver the three-pronged Bunnings strategy of Low Prices, Widest Range and Best Service in the very competitive UK market.

Download the full Wesfarmers 2016 Strategy Day Presentation here.

Gilliam responded with “Four months post completion, the acquisition thinking (has been) validated and (We) confirm the financial guidance provided at acquisition announcement.”

At this stage, Wesfarmers still plans to invest £500m to develop Homebase into a strong position in the market, with the first Bunnings pilot store due later this year. However, in the first evidence of possible cracks appearing, it was stated that should the trials not achieve the required results, then they will not push forward with the planned £500m investment. “Successful pilots are an absolute precursor to further investment,” Gillam said.

So we have to ask ourselves a key question, should the pilot stores not work, what then? With no further planned investment from Wesfarmers, you're left with a lame duck retailer, a Homebase/Bunnings hybrid with no clear direction or consumer offer. The pressure on the business to deliver a successful trial is now huge and you can bet that they will take some time to choose the location and the specific format. Our guess is that we won't see this new store until at least 2017.

Watch this space....

Source: Steve Collinge - MD - Insight Retail Group.

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22 June 2016

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