Bunnings: Expansion ramps up

The dominant hardware retailer is looking to entrench its advantage

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Wesfarmers Limited (ASX: WES) hardware chain, Bunnings, today announced that it will spend $1.5 billion on an expansion plan that will create 6,000 jobs in the next three years, as the company looks to grab a greater share of the $35 billion industry.

Bunnings says it plans to build up to 85 new stores in Australia over the next three years, which will also create up to 11,500 construction jobs.

The company is trying to over-shadow the rollout of rival Woolworths Limited's (ASX: WOW) Masters branded hardware stores.

Woolworths has announced plans to open up to 150 stores over five years, with eight open currently and another 17 under construction.

Bunnings opened its 200th store today, 18 years after opening store number one in Victoria. It has the advantage of an established network and brand, operating experience and substantial scale. In three years' time, Bunnings is still likely to have more than twice the number of stores as Masters, and retain some advantage.

It also means it will make it more difficult for Masters to ramp up its sales and enjoy the returns of its competition, as it competes against the incumbent market leader, who's refusing to just lie down.

Fragmented market

Mitre 10, which is 50% owned by Metcash Limited (ASX: MTS) appears to be struggling, and may even fall by the wayside under the pressure from Bunnings and Masters. However, given the size of the home hardware market, and its fragmentation, its possible the big three (Bunnings, Masters & Mitre 10) will be able to coexist happily by taking share from suburban hardware stores.

Foolish takeaway

Whichever way you look at it, its good news on many fronts. Good for the struggling job market, good for home handypersons and probably good news for investors in Wesfarmers and Woolworths.

If you are looking for ASX investing ideas, look no further than "The Motley Fool's Top Stock for 2012." In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

More reading

Motley Fool contributor Mike King owns shares in Woolworths.The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »