1. Comment
May 25, 2018updated 03 Nov 2021 5:33am

Homebase-Bunnings: disastrous acquisition reaches inevitable conclusion

Wesfarmers has finally managed to extricate itself from the UK, selling its Homebase operation to Hilco for £1, in what appears to be the only sensible decision it has made during the two-year debacle.

By GlobalData Consumer

Wesfarmers has finally managed to extricate itself from the UK, selling its Homebase operation to Hilco for £1, in what appears to be the only sensible decision it has made during the two-year debacle.

Free Report
img

What’s missing from your IPO industry assessment?

IPO activity all but stopped in 2020, as the investment community grew wary of the effects of COVID-19 on economies. No matter how deserving a business was of flotation, momentum was halted by concerns of when a ‘new normal’ of working patterns and trade would set in. Recently, sentiment has changed. Flotations picked up again during the second half of 2021, and now in 2022 the mood is decidedly optimistic. Business leaders have their eyes on fast rebounding economies, buoyant market indices and the opportunity once again to take their businesses public. As a result, global IPOs are expected to hit back this year. With GlobalData’s new whitepaper, ‘IPOs in Consumer and Retail: 5 must-include elements for your prospectus industry report’, you can explore exactly what is needed in the essential literature. GlobalData’s focus lies in the critical areas to get right:
  • Macroeconomic and demographic environment
  • Consumer context
  • Industry environment
  • Competitive environment
  • Route to market
Interested to learn more about what to include in your IPO Industry Assessment report? Download our free whitepaper.
by GlobalData
Enter your details here to receive your free Report.

While the Australian company claims that the macro-economic environment and difficult DIY market exacerbated its problems, there can be no doubt that it was its calamitous management decision-making that has led to its embarrassing retreat.

The most obvious misstep – and the one that led to so many other bad decisions – was the routing out of the incumbent management as soon as it had completed the £340m-purchase from Home Retail Group in 2016. Puffed full of hubris having just seen off Woolworth’s-owned Masters in its home territory, Wesfarmers believed that its formula of hard DIY stores could be easily replicated in the UK.

The decision to get rid of all that local knowledge runs completely counter to everything retailers have been saying and doing over the last 10 years – you must know your customer, and adjust your model to fit what they want. Instead, it thought it could impose its model on the UK consumer.

In the years prior to Wesfarmers’ acquisition, Homebase had been trying, correctly in our opinion, to differentiate itself by introducing more homewares lines and making the stores more appealing to female shoppers. Wesfarmers undid all this progress in weeks, turning the stores into bargain bin-littered dumps, with hand-written signs. Its plan was to focus on DIY, and ensure high range availability, service and the lowest prices, but it alienated the customers Homebase had worked so hard to attract, and they voted with their feet.

It reversed planned store closures, such was its confidence, and started piloting Bunnings-branded stores, which to start with at least, showed a complete misunderstanding of not only the UK customer, but of the UK itself. The product mix was such that Wesfarmers must have thought that British people spent most of their time outdoors in enormous gardens cooking on large barbeques. The Wesfarmers board seemed unaware of the UK climate, customer behaviour and living environment, something they would have had a better handle on if someone there had even bothered to watch an episode of Coronation Street.

New owners Hilco have a lot of work to do, starting with a reversal of the branding of the 24 Bunnings stores back to Homebase stores. We will watch its moves with interest – it may attempt to reposition the brand back with homewares and invest in more comfortable, shoppable stores, to woo back former Homebase shoppers, but this will be costly to implement.

Hilco’s history with distressed retailers has led to accusations of asset stripping, but one of its most recent retail acquisitions, that of music and video retailer HMV, gives some cause for optimism. It took 141 HMV stores out of administration in 2013, and still has a portfolio of over 130 stores in the UK. This is despite the fact it operates in a continually declining market, and is regarded as driving hard bargains with landlords. Hilco will need to utilise all its negotiating powers with landlords to ensure the survival of Homebase.

 

For more insight and data, visit the GlobalData Report Store – Verdict Retail is part of GlobalData Plc.

Free Report
img

What’s missing from your IPO industry assessment?

IPO activity all but stopped in 2020, as the investment community grew wary of the effects of COVID-19 on economies. No matter how deserving a business was of flotation, momentum was halted by concerns of when a ‘new normal’ of working patterns and trade would set in. Recently, sentiment has changed. Flotations picked up again during the second half of 2021, and now in 2022 the mood is decidedly optimistic. Business leaders have their eyes on fast rebounding economies, buoyant market indices and the opportunity once again to take their businesses public. As a result, global IPOs are expected to hit back this year. With GlobalData’s new whitepaper, ‘IPOs in Consumer and Retail: 5 must-include elements for your prospectus industry report’, you can explore exactly what is needed in the essential literature. GlobalData’s focus lies in the critical areas to get right:
  • Macroeconomic and demographic environment
  • Consumer context
  • Industry environment
  • Competitive environment
  • Route to market
Interested to learn more about what to include in your IPO Industry Assessment report? Download our free whitepaper.
by GlobalData
Enter your details here to receive your free Report.