Could Wesfarmers take Bunnings global?

A successful overseas expansion strategy could produce significant shareholder value.

a woman

According to a report by Businessday.com.au, Mr John Gillam, the head of hardware store chain Bunnings — owned by Wesfarmers (ASX: WES) — declared during an address to the Hardware Federation of Australia this week that: “We have no immediate plans to go into a new geography, we are international now [in New Zealand], and we understand that dynamic, but it might be disappointing in a decade’s time if we wouldn’t have gone into a new geography.”

For Wesfarmers shareholders it’s an exciting plan to ponder. Across Australia and New Zealand there are already 210 Bunnings Warehouse stores, 67 Bunnings smaller format stores and 36 Bunnings Trade centres. As of 30 June there were also a further 20 Warehouse stores under construction. While there would still appear to be a good pipeline of store roll-out opportunities for Bunnings in Australia growth will inevitably slow as its market penetration increases.

The Bunnings business is very much the jewel in the crown for the group; the earnings before interest and tax margin were 11.7% and its return on capital is 25.9%. If Bunnings could successfully enter a large, new market and still make these kinds of returns it could provide significant shareholder value into the future.

Foolish takeaway

Of course entering a new market is no easy feat, let alone doing it in a foreign territory! Indeed, Woolworths (ASX: WOW) through its joint venture with the US-based home improvement giant Lowe’s, has found this out, with early start-up losses higher than expected.

Buying growth stocks can be an important part of an overall investment strategy but that doesn’t mean neglecting quality dividend-paying stocks. Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

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 »

asx share price competitions represented by businessmen arm wrestling
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 »

person reading news on mobile phone
⏸️ 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 »