Retail giant Woolworths will shut down its struggling home improve department Masters, leaving 8,500 staff jobless. Following an extensive review Woolworths finally decided either to sell or wind up its loss making home improvement venture includes Masters and Home Timber & Hardware Chains. Woolworths Chairman Gordon Cairns said the survey showed that, it will take a number of years for Masters, which was set up in 2011, to become more cost-effective.
Mr. Cairns pointed out that the board has determined that they cannot sustain these losses. Masters estimated a $717.1 million of losses before tax over four years to June 2015. Woolworths’ beginning estimate was for Masters to return back the initial investment following five years of business. The long awaited decision to leave the home improvement business was welcomed by financial specialists and retail examiners. Woolworths’ shire prices increased 99 cents or 4.4 percentages and now it worth at $23.65 per share.
Mr. Cairns said Woolworths will now concentrate on its supermarket chain, which doing combating rivalry from opponents Coles and Aldi. Before Woolworths can leave its home improvement business it plan to purchase its US-based joint ally Lowe’s, which right now holds a 33.3 percentage stake. The contract will take almost two months to determine. Mr. Cairns said that the home improvement business will continue its business through the period.
Meanwhile, 7,000 employees at Masters’ 63 stores and the 1,500 employees at 275 Home Timber and Hardware outlets face uncertainty. Mr. Cairns said that, the top need is to make best decision by our shareholders, representatives, suppliers, clients, and will act rapidly and transparently to minimize the effect of this choice.
Gerard Dwyer, the national secretary of retail workers union SDA, said that they it will work with Woolworths to minimize the impact of the decision. Woolworths is reviewing its 66.7 percent stake in the home improvement business, which has been under high pressure from opponent Wesfarmers’ equipment chain Bunnings. The estimation of the Masters business was $2.8 billion toward the end of June 2015, but the figure is expected drop given the extreme business environment. Macquarie Group said that Woolworths would free up capital by leaving the home improvement business, allowing it to focus more on the supermarket business.
It is known that the key beneficiary of Masters Windup is to be Bunnings, while the Metcash-possessed Miter 10 equipment chain could purchase Home Timber and Hardware stores and few Masters destination. Wesfarmers CEO Richard Goyder was hesitant about the effect Woolworths’ choice would have on Bunnings. It is extremely tragic news for their group. We don’t think it is suitable to make any further remark as of now, he said. Woolworths’ choice comes as Wesfarmers moves to grow Bunnings into the UK, with the STG340 million ($A705 million) acquisition of Homebase. A representative for Metcash is not available to comment on whether it would be occupied with procuring any of Woolworths’ home improvement business.