Bunnings UK and Ireland sales have been hampered by “adverse” trading conditions in Homebase stores.
Total sales for the first quarter of the 2018 financial year fell 13.8% compared with the same period last year, reaching £276 million. Store-on-store sales decreased by 11.9%.
Bunnings claimed that while it saw steady sales in core home improvement and garden categories, Homebase’s trading performance was adversely affected by the significant clearance of discontinued ranges last year.
Despite the dip, Bunnings Group managing director Michael Schneider said that early trading performance of the first eight Bunnings Warehouse pilots were “encouraging”, and that the engagement of customers, suppliers, team members and local communities with the stores “remains pleasing”.
“While the performance of Homebase is disappointing, we continue to be encouraged by the performance of the Bunnings pilots,” said Schneider. “The BUKI team remains focused on stabilising the performance of the Homebase stores as well as delivering proof of concept for the Bunnings format.”
There were 244 Homebase stores and eight Bunnings Warehouses as of September 30. A total of 15 to 20 pilot stores are expected to be either trading or nearing completion by December 31.
Emily Stella, senior retail analyst at GlobalData, commented: “Bunnings’ entry into the UK has been bold. The retailer removed home furnishings ranges from Homebase, and has only executed eight Bunnings pilot stores to date of a 244 store estate – with two Homebase stores currently undergoing conversion. Bunnings has also halted installation and in-house planning services, and temporarily withdrawn its online offer.
“So far this strategy hasn’t paid off, with Homebase/Bunnings last year logging its lowest sales over a 12-month period in seven years. But that was excusable given its relatively new entry into the UK, and the teething problems the retailer experienced as it ramped up discounting to clear Homebase stock. However, this disappointing set of Q1 results, where sales fell to £276m and transaction volumes by 5% in the UK, is a disaster, particularly given the high level of discounting at Homebase, which should have bolstered footfall.
“While Bunnings has been slow to roll out its eight pilot stores, the retailer has effectively turned existing Homebase stores into Bunnings stores, minus the branding. This has left Homebase consumers confused, and has likely contributed to the reported decline in footfall as Bunnings fails to attract new customers to counter the loss of loyal Homebase customers.
“Bunnings is clearly also under pressure from investment analysts who appear to be losing faith in the UK investment. If new head of Homebase David Haydon doesn’t turn the business around soon, Bunnings will be pressed to cut their losses in the UK.”