UNITED States paint giant Valspar, which in 2010 bought leading Australian paint brand Wattyl for $142 million, has admitted its delisting from Bunnings hardware stores has cost it $US30 million in turnover.
But the paint group remains confident it can counter that sales setback through its close relationship with Woolworths and its new hardware joint venture, Masters. Valspar believes Woolworths' ambitious rollout plans will help Wattyl regain much of its lost sales momentum by the end of the year.
Valspar president and chief executive Gary Hendrickson told US analysts last week Masters had seemed to be doing "extremely well" since its launch in September last year and that it coveted much of the shelf space that Woolworths and its US partner Lowe's had set aside for paints.
"We want most of the shelf space in those stores with our Lowe's brands and most stores are doing very well," Mr Hendrickson said.
But he admitted the decision by the Wesfarmers-owned Bunnings to get rid of Wattyl brands at its hardware stores, and devote more space to paint rivals Dulux and Taubman's, had dented Valspar's growth plans.
"We have a number of other growth initiatives occurring in Wattyl. We lost the [Bunnings] business. So that set us back a little bit. That was about $US30 million in business. And we tend to think of the business that we're winning at Masters as the offset to that.
"And a break-even for that is probably the number of stores that might be opened by the end of this year for Masters."
A weak housing market in Australia was another challenge facing Wattyl.
"We didn't expect the housing market to be as weak as it is and so the volumes in the market are significantly weaker than we would have expected."
Mr Hendrickson said Wattyl had other strategies in the retail channel to return to growth in Australia that would complement its relationship with Masters.
"But we sell through other channels and to drive market we sell through independent paint stores and we sell through our own stores. And we've got growth initiatives in place in both our stores business and our independent business. If we're successful in those, we're going to start to see growth even this year."