Woolies builds $1.1b land bank for hardware
The retailer, which has launched an attack on the dominance of hardware heavyweight Bunnings, has also amassed a sizeable freehold property portfolio, buying independent hardware businesses to swell the ranks of its home-improvement offering.
Documents obtained by BusinessDay show the Masters joint venture is still running up sizeable losses, with the sprawling hardware operation posting a full-year loss before interest and tax of $138.86 million in fiscal year 2013.
Following an income tax benefit, the Masters business, which includes Danks hardware distribution and the operation of banner groups Home Timber & Hardware, Thrifty Link and Plants Plus, made a full-year loss of $98.14 million. Total revenue rose to $1.24 billion from $828.3 million.
Woolworths owns 66.66 per cent of Masters and is estimated to have invested $2 billion in capital since it began the partnership three years ago. The joint venture is forecast by Woolworths boss Grant O'Brien to break even in 2015-16.
Woolworths and Lowe's have amassed a large amount of land for its rollout program that will see the number of Masters stores rise from 31 at present to around 150 in the next few years.
Financial documents lodged by Woolworths and Lowe's with ASIC show it was sitting on development properties worth $502.2 million as at June 30 as well as freehold land, warehouses, retail and other sites worth an extra $594.86 million.
In 2012-13 it spent $21 million on acquiring the Hardings Hardware business, adding to its ranks three stores in Victoria, two in Queensland and one in South Australia.
This gives the Masters joint venture a land bank and property portfolio worth nearly $1.1 billion, up sharply from its total property book in 2012 valued at $850 million.
Masters doubled the number of stores it opened in fiscal year 2013.
The property portfolio is in part driven by the failure of developers since the global financial crisis, as well as the unwillingness of banks to lend to those that survived, which forced Woolworths and its rival Bunnings to locate, buy and develop some of their own sites.
Bunnings has plans to invest $1.5billion building as many as 78 new stores over the next three years to defend its dominant position.
Masters has plenty of firepower to drive its growth plans. At the end of fiscal year 2013 Woolworths' hardware retail and distribution operation was sitting on assets of $2.18 billion, up from $1.66 billion, and almost no debt.
Woolworths' wages bill spiked as more staff were needed, with hardware staff numbers rising by nearly 1000 last financial year to 5813, an increase of 20 per cent.
Frequently Asked Questions about this Article…
Woolworths, in partnership with Lowe's, is expanding its hardware business by building a land bank worth nearly $1.1 billion. This strategy involves acquiring land and properties to support the national rollout of Masters hardware stores across 100 sites.
Woolworths, in partnership with Lowe's, is expanding its hardware business by building a $1.1 billion land bank to support the national rollout of Masters hardware stores across 100 sites. This strategy includes acquiring independent hardware businesses and developing a sizeable freehold property portfolio.
Woolworths is challenging Bunnings by launching Masters hardware stores and acquiring independent hardware businesses to enhance its home-improvement offerings. This move is part of their strategy to compete with Bunnings' dominance in the market.
The Masters joint venture, despite its expansion efforts, posted a full-year loss before interest and tax of $138.86 million in fiscal year 2013. However, total revenue rose to $1.24 billion from $828.3 million, indicating growth in sales.
In fiscal year 2013, the Masters joint venture reported a full-year loss before interest and tax of $138.86 million. However, after an income tax benefit, the loss was reduced to $98.14 million, with total revenue rising to $1.24 billion from $828.3 million.
Woolworths' CEO, Grant O'Brien, forecasts that the Masters joint venture will break even in the 2015-16 fiscal year, suggesting optimism about the venture's future profitability as it continues to expand.
Woolworths has invested approximately $2 billion in capital into the Masters joint venture since it began the partnership with Lowe's three years ago.
Woolworths plans to increase the number of Masters stores from 31 to around 150 in the next few years, leveraging its extensive land bank and property portfolio to support this expansion.
The future plans for Masters hardware stores include increasing the number of stores from 31 to around 150 in the next few years, supported by a substantial land bank and property portfolio.
Woolworths has faced challenges such as the failure of developers since the global financial crisis and banks' reluctance to lend, which has necessitated the purchase and development of its own sites for the Masters stores.
The global financial crisis led to the failure of developers and banks' unwillingness to lend, prompting Woolworths and its rival Bunnings to locate, buy, and develop their own sites to support their expansion plans.
Woolworths has invested $2 billion in capital for its hardware expansion, while its competitor Bunnings plans to invest $1.5 billion to build 78 new stores over the next three years, highlighting a competitive landscape in the hardware sector.
At the end of fiscal year 2013, Woolworths' hardware retail and distribution operation was sitting on assets valued at $2.18 billion, up from $1.66 billion, with almost no debt.
The expansion of the Masters hardware stores has led to a significant increase in Woolworths' workforce, with hardware staff numbers rising by nearly 1,000 last financial year to 5,813, marking a 20% increase.
Woolworths' workforce has grown significantly due to its hardware expansion, with hardware staff numbers increasing by nearly 1,000 last financial year to a total of 5,813 employees, marking a 20% increase.
At the end of fiscal year 2013, Woolworths' hardware retail and distribution operation held assets worth $2.18 billion, up from $1.66 billion, with almost no debt, providing a strong foundation for its growth plans.
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