The Australian owner of Homebase is considering closing up to 40 stores in the UK and could potentially leave the DIY market completely.
Wesfarmers today announced a £454m impairment charge and a pre-tax loss of £97m for the six months to December.
Following a $1bn write-down of its acquisition of Homebase, it is reviewing its future commitments to the DIY sector, in a process expected to conclude in June.
The company paid £340m for Homebase in February 2016. It originally planned to convert all 250 stores in the portfolio to the Bunnings Warehouse brand, but group managing director Michael Schneider has now halted the process.
Since buying Homebase, Wesfarmers has rebranded 19 stores to the Bunnings brand at a cost of £50m. The outstanding lease liabilities across the rest of the estate are estimated to be around £1bn.
However, its departure from the UK could create opportunities for expanding discounters.
GlobalData retail analyst Thomas Brereton said: “What would an exit mean for UK retail? Firstly, it would leave around 250 Homebase stores and the 19 currently operational Bunnings locations left in the wind; an unwieldly network, with onerous lease obligations that would be almost impossible to offload as a whole.
“The expanding discounters B&M and The Range might be interested in a portion of these, but in a retail landscape focused on convenience and digital capability there is a palpable dearth of retailers lining up to take on such locations.
“Secondly, it would leave a 7% gap in the DIY market, which would grab the attention of struggling market leader B&Q as well as proving a tempting opportunity for discounters looking to expand into new ranges.”
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