Woolworths and its US joint-venture partner, Lowe's, are sitting on a land bank worth nearly $1.1 billion as they lay the groundwork for the national rollout of their Masters hardware stores across 100 sites.
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 $1.5 billion 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.