Woolworths to Defy Bunnings Dominance

Submitted by Jim Thesiger on 26 August, 2009 - 05:00

The Australia based retail group Woolworths (WOW) has revealed its plan to go for an assault over the country’s $24 billion worth of hardware industry. The plan includes a tie-up with US based group Lowe’s- the second biggest company of the world and also a roll-out of stores at a large format aimed at launching a strike over Wesfarmer’s Bunnings which is currently the market leader. Woolworths is assumed to spend a minimum of $1 billion over next four years on network of home-improvement store eyeing to acquire over 150 sites by 2014-2015. The first stream of investment will be executed in partnership with Lowe’s which is expected to pour $400 million US dollar into the venture and also will supply management skills. Lowe’s is expected to take one third of the hardware business equity stake.

The move from Woolworths is considered as a major threat to Bunnings that has about 18 percent of the market share. The Woolworths authority stated yesterday that the company has secured the entitlement to 12 sites. Final talks on getting entitlement of 15 more sites are also going on for the development of Greenfield. The Woolworths shares have already started to enjoy the positive impact of the new mission with investors boosting up the stock price 3 percent while the rival Wesfarmers shares went down for more than 10 percent.

The Australian retail giant Bunnings welcomed the fresh entrants yesterday. Bunnings currently has a yearly turnover which is more than $5.8 billion and posted an impressive double digit growth despite the ongoing global recession. Bunnings valuation for hardware and improvement industry was at $36 billion. Woolworths assault in the hardware market is seen as an introduction to a major war between the two corporate giants. Woolworths chief executive, Michael Luscombe stated that the his company’s inclusion in the hardware industry might boost up the growth of the overall sector where he believes Woolworths has the opportunity to bring in new products and services for the consumers that are currently not being offered in the Australian market.