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Wesfarmers' chairman to undertake UK store tour

Bunnings MK2

It has been reported that Michael Chaney, chairman of Wesfarmers, is to visit the UK this week for a tour of Homebase and Bunnings stores.

He will be joined by Archie Norman, an advisor to Wesfarmers and the current chairman of M&S, who has an extensive track record in retail and brands and is also known as #the turnaround king'.  Mr Norman is understood to have advised Wesfarmers against the purchase of Homebase, which cost the group £340 million in early 2016 and reported losses of almost £100m in the second half of 2017.  Despite several challenging years, Homebase had been a profitable business prior to the Wesfarmers takeover. 

February saw Wesfarmers announce that it was to review 'options to improve the trading performance of Homebase as well as further evaluating the performance of the pilot stores to inform the future plans for BUKI'.  

Wesfarmers Managing Director, Rob Scott, stated: The Homebase acquisition has been below our expectations which is obviously disappointing. In light of this, a review of BUKI has commenced to identify the actions required to improve shareholder returns.”

It was Wesfarmers' intention to transplant Bunnings DNA into the entire Homebase store estate, at a cost of £500 million, over a number of years. Despite bringing in a new management team and rebranding more than 20 stores as Bunnings, sales have stalled, resulting in Wesfarmers' plans to exit around 40 stores.

Homebase's 200+ store estate has rental obligations of c. £1 billion and the worst-performing stores are to be shuttered. The chain's Colchester branch is the most recent to have been earmarked for closure.

Rob Scott has told investors that "all options are open”, adding: “There’s value in this network and we want to make sure that we reduce the trading losses and hopefully put the business on to a path to profitability.”

Wesfarmers is believed to have sought assistance from Lazard, an investment banking company. Archie Norman is chairman of the London business. 

Various private equity firms are understood to be circling Homebase, along with discount retailer B&M.

Source : Insight DIY Team 

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09 April 2018

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