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Masters takes on Bunnings in Sydney

Woolworths is taking on Wesfarmers' Bunnings in the heartland of the $45 billion home improvement market, opening four Masters big-box stores in western Sydney in 2015 at a cost of $100 million.

Woolworths' home improvement managing director, Matt Tyson, said on Tuesday the four stores were the first of many planned for Sydney under a new strategy aimed at boosting Masters' presence in metropolitan markets.

The supermarket giant announced in August that its home improvement business would not break even in 2016 as planned and flagged changes to its strategy to boost sales, reduce costs and improve profitability.

Woolworths now plans to open 10 to 15 Masters stores a year for the next few years – rather than 20 to 25 stores a year – and is focusing on higher quality sites in key metropolitan areas while selectively filling gaps in the store network.

Analysts believe Masters' sales have fallen short of expectations because Woolworths has focused in the past on opening Masters stores in regional and rural areas, where large sites are easier to find and development approvals are easier to obtain.

Woolworths has only four Masters stores in Sydney at present – at Chullora, St Marys, Hoxton Park and Gregory Hills – and six in regional NSW including Bathurst, Wagga Wagga, Taree and West Gosford.

The four stores unveiled in Sydney on Tuesday are in the fast-growing centres of Penrith, Marsden Park, Northmead and Rouse Hill.

Woolworths said the four stores would create 2000 jobs in the construction phase and 400 retail jobs.

The Rouse Hill store will open in April and Northmead, Marsden Park and Penrith closer to June.

Woolworths also plans to open another eight Masters stores this year in Queensland, South Australia, Victoria, and northern NSW, taking the Masters network to more than 60.

Analysts have welcomed the new strategy, which also includes expanding the Masters product range, improving layouts to make stores easier to navigate, and increasing floor space for categories that drive customer visits, such as bathrooms, gardening and hardware.

However some analysts, such as Commonwealth Bank's Andrew McLennan, fear that the big-box market is close to saturation, particularly in the metropolitan market.

"Bunnings also has first-mover advantage and has secured most of the top sites," Mr McLennan said in a recent report.

Woolworths' home improvement division lost $169 million in 2014 and analysts believe it may lose $180 million in 2015 before breaking even in 2018/2019.

Woolworths and its joint venture partner Lowe's have invested about $2.9 billion into the venture to date.

Source : Sue Mitchell - Canberra Times

11 December 2014

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