DIY specialist Bunnings UK has reported a pre-tax loss of £28 million in its first half results as it began the process of converting the Homebase estate into the Bunnings brand.
The Australian-headquartered retailer said that earnings were affected by clearance of deleted Homebase product ranges and high levels of price deflation with the move to an Every Day Low Price strategy. The retailer’s profits were also affected by the closure of five stores planned by its previous owner, restructuring and one-off repositioning costs.
Bunnings UK is embarking on an ambitious strategy to increase customer participation in DIY and gardening, and while it recorded a 9.1 percentage point increase in transactions on a like-for-like basis, in terms of value, sales fell by somewhere between 7 and 9 per cent compared to the same period a year ago, under the previous owners.
As the retailer has chosen to prioritise stores over online investment, it will need to continue its momentum by offering very high levels of customer service and product knowledge to be a key source of differentiation from competitors such as B&Q and the general merchandisers.
Bunnings UK is investing heavily in its existing store network, and opening a further four pilot stores before the lucrative spring/summer period. The retailer must implement any key learnings from these stores into the remainder of the Homebase estate immediately to help drive growth in what will be a challenging 2017 market. The DIY and gardening sector is becoming more fragmented and increasingly competitive as general merchandisers continue to capture share and Screwfix continues its stellar growth with its successful click & collect model.
Bunnings approach to the UK is very traditional. Rather than talking up its multichannel capabilities, the retailer believes it can win share from market leader B&Q by operational excellence alone – service, price and availability – though it may be in danger of underestimating the ability of B&Q to respond.
- Anish Dosani is a senior analyst with GlobalData.