However a new battleground is unfolding in the home improvement/hardware sector which pits the incumbent Bunnings (owned by Wesfarmers) against the new entrant Masters (owned by Woolworths in a joint venture with U.S. home improvement giant Lowe’s). While there will likely be many more twists and turns in this battle, here are some facts about how the two measure up against each other so far.
For the half-year just ended, the Wesfarmers Home Improvement division which incorporates Bunnings reported a 10.4% increase in revenues to $4.434 billion and an 8.5% increase in earnings before interest and tax (EBIT) to $562 million. Same store sales growth was also a pleasing 7.2%.
Bunnings currently has a network of 318 stores made up of 218 Warehouse format stores, 65 smaller format stores and 35 trade centre stores. During the half, five new stores (net) were opened with a further 15 under construction.
Return on Capital grew to 27.6%, compared with 25.5% in the previous corresponding half.
The Woolworths Home Improvement division reported sales revenue of $796 million and losses before interest and tax of $64.4 million for the half year.
These revenues and earnings were split $393 million for the Masters brand and $403 million for Home Timber and Hardware brand. At the EBIT level, the divisions reported a $71.9 million loss and a $7.5 million profit respectively.
Woolworths now operates 38 Masters stores, with these stores now having operated for an average of 15 months. The company remains on track to meet its goal of having 49 stores open by the end of June 2014.
While in one respect Woolworths has proven itself to be a superb retailer when viewed through the prism of its all-important food and liquor businesses, its performance at operating Dick Smith Holdings Ltd (ASX: DSH) puts a dark cloud over management’s ability to effectively run a retailer outside of its core competency of food and liquor.
Wesfarmers is definitely winning the hardware war at present but should Masters prove itself a viable opponent to Bunnings then it has the potential to add meaningfully to Woolworths’ future earnings.
Where to 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 more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
- 3 ASX stocks to buy now to get rich later – October 20, 2016 1:34pm
- Why this fund manager is worried about the sustainability of bank dividends – October 18, 2016 7:56am
- Here’s why I might buy these 2 beaten-up share bargains – October 17, 2016 4:18pm