Wesfarmers/Bunnings released its full year financial results for FY2023/24 on 29 August 2024. The results for Wesfarmers showed that the company has essentially kept pace with market growth overall. Revenue was $44,189 million, an increase of 1.5% over the previous corresponding period (pcp), which was FY2022/23. Earnings before interest and tax (EBIT) rose by 3.3% over the pcp to $3989 million, and net profit after tax (NPAT) lifted by 3.7% to $2557 million.

Outside of Bunnings, Kmart Group (incorporating Target) saw earnings increase by 24.6% over the pcp to $958 million and Officeworks lifted its earnings by 4.0% to $208 million. WesCEF (Wesfarmers Chemicals, Energy & Fertilisers) saw a decline in earnings of 34.2% to $440 million. Catch, which had losses of $163 million in FY2022/23, reduced losses to just $96 million in the reporting period.

Bunnings

Bunnings saw revenue grow by 2.3% over the pcp to reach $18,968 million. With a background growth rate of 0.5% for hardware retail turnover throughout Australia in FY2024, this indicates that Bunnings grew marketshare. EBIT for Bunnings came in at $2374 million, an increase of 1.2% over the pcp.

Total stores sales growth fell to 2.6% as compared to the pcp's 3.7%, but store-on-store (comp) sales growth was 2.1%, as compared to the pcp's 1.8%. Digital sales rose to 5.5% of all sales, where the pcp reported 4.4%. Digital sales in the first half of FY2023/24 were 5.1%, and this rose to 5.9% in the second half.

Presentation

In his introductory remarks to the results presentation, Wesfarmers managing director (MD) Rob Scott had this to say about Bunnings:

This year, Bunnings continued to expand its range with innovation across categories such as Smart Home, supporting an increase in customer demand. Bunnings also continued to invest in supply chain data and technology projects to strengthen the customer experience across channels such as the new Bunnings local delivery service.

The business continued to improve its whole build commercial strategy and in the second half, Bunnings opened a new state-of-the-art frame and truss site to supply customers with pre-made frame and trusses with greater efficiency at a lower cost.

The delivery service was further described in the results documentation:

A new last-mile delivery service, Bunnings Local Delivery, was launched and expanded to more than 50 stores, improving the delivery experience for customers.

According to the Bunnings website:

Bunnings Local Delivery is a service provided by selected Bunnings stores to deliver customer orders within their local communities. The Bunnings Local Delivery service is recognisable by our team members, in their Bunnings uniforms, delivering customer orders to homes, businesses and sites in our Bunnings-branded vehicles.

Further:

Bunnings Local Delivery is not an option for customers to select. Bunnings Local Deliveries are determined at a store level, factoring in product dimensions, loads and other delivery options.

In his remarks, Wesfarmers CFO Anthony Gianotti profiled the performance by Bunnings:

In Bunnings, sales growth of 2.3% was supported by growth in both consumer and commercial segments, driving growth in transactions and units sold. As household budgets remained under pressure, consumer sales growth was supported by Bunnings' strong value credentials with bulk pack quantities, own brand products and entry-level ranges all performing strongly.

Pleasing second half sales growth was supported by sustained demand for repairs and maintenance, online channel growth, and range innovation partly offset by a market-wide softening in building activity. Commercial sales growth reflected continued demand from trades, but demand from builders moderated through the year as new buildings starts will lower, relative to recent years.

The sentiments were echoed by the documentation, with an added note on the outlook for Bunnings:

The market-wide softness in building activity is expected to continue in the 2025 financial year, but population growth and the shortages in Australian housing stock are anticipated to support a recovery in building activity over the medium term.

At the end of the presentation's introduction, Mr Scott returned to the prospects for FY2024/25:

For the first eight weeks of the 2025 financial year ... Bunnings continued to see positive sales growth, but growth has moderated from the second half of 2024 financial year impacted by the continued market-wide softening in building activity.

Presentation questions

The majority of the questions at the results presentation focused on Bunnings. Tom Kierath from Barrenjoey started with a question about store growth at Bunnings. The reply by Bunnings MD Mike Schneider is interesting, as it outlines a shift in the retailer's thoughts on expansion. After outlining the actual store expansion that is in place, Mr Schneider said:

Then alongside that and complementing that is the work that we're doing inside the box to drive space productivity harder. So automotive for example, rolling into our stores at the moment and that's coming as we reduce some space in flooring because we can lean more on Beaumont's, for example. So hopefully that gives you a bit of a perspective that we sort of see space growth continuing to be sort of that 10% over the five-year period, but just some timing on some of the projects.

David Errington of Bank of America followed up on this line of questioning:

This is the only question I've really got front of my mind when I'm looking at valuing Wesfarmers as an investment, and that is whether Bunnings has got a lot of growth runway, or whether it's going ex-growth?

What worried me in listening to your answer to Tom's question, and it did worry me when I see the CapEx dropping off as significantly as it does for Bunnings (and it's ironic that I'm saying that about CapEx), but when I look at, like, a Woolworths that spends $2.5 billion on CapEx and Coles are spending over a billion, your CapEx on Bunnings is only $260 million. It's dropped. And when I'm looking at your working capital, you've really driven working capital extremely hard in Bunnings this year, a saving of $230 million despite an inflationary world, [where] I'm imagining inventory ... costs would go up.

So I don't want to poke the bear, but I am in a way, but I am poking you in a way that you're running Bunnings as if it's an ex-growth business. Now I know that there's delays in buildings and whatnot, but I was wondering if Mike [Schneider] can really basically talk about some of the growth initiatives that you've got. Because at the moment when I look at Bunnings' numbers, I understand it's a tough environment, but for me in valuing Wesfarmers, the most important thing for me today is to ensure that still a premium growth business and you are not running it as a mature business that's gone ex-growth.

In his response, Mr Schneider began by pointing out that the design of Bunnings' stores was highly modular, which meant new lines could be added with less effort.

What we don't find ourselves with is the need to go back and sort of hack into 50, 60 stores... We've built a lot of functionality and modularity into our racking in our layout so that when we roll in new categories and new ranges, it's very CapEx light, but it's very revenue positive.

He also pointed to new initiatives in the tool section of Bunnings.

We've got a new tool shop concept that we're rolling into 50 stores before Christmas that when you see them, our tool shop looks materially different. It's delivering some really interesting and very positive results both across our consumer brands and our commercial brands. But we don't have to go and build a new tool shop to do that, David, we just have to modify and adjust racking so we can do that in a CapEx light way.

He also defended Bunnings' further expansion into building, trade and commercial:

We've thought very deeply about how we drive growth in trades, how we drive growth in organisations and we're actually - not withstanding some of the headwinds from a domestic construction point of view - we're actually seeing some incredibly positive results in those areas.

Mr Scott added the comment that one thing which had retarded growth was the high price of construction. He also pointed to Bunnings' investment in frame and truss plants, which would likely only show returns in the medium term.

Pressed further by Mr Errington, Mr Schneider listed more of the growth plans that Bunnings has. In fact, in response to a range of questions, Mr Schneider mainly enumerated what he sees as the growth opportunities for Bunnings. So it is perhaps best to simply list a number of these here.

Analysis

The question about Bunnings is this: how do you manage a retailer in a market which sees extraordinary growth over a period of around three years, followed by a decline in growth that is set to last somewhere from 18 to 36 months?

The two main approaches are to: 1) take full advantage of the upward "blip", then ride out the downwards "blip", preserving the same basic structure to the business, while making as many non-structural accommodations as you can; or 2) see this pattern as being something more than a market boom-and-bust, and set about reforming the business to cope with a changed market.

Bunnings has very much elected to take the first option. Reading the above discussions with the investment analysts it is evident that the overall strategy for Bunnings, in HNN's opinion, is based on treating the current down trend in the building - and therefore hardware - market as a "blip", not a structural shift. In that view, once interest rates are reduced (which HNN expects for the second RBA meeting in 2025, not the first) the housing construction market will recover, at least back to FY2018 levels of activity, and Bunnings will pop back into revenue growth.

The main step the company is taking to deal with the "blip" is to cut back - temporarily - on investment in Bunnings. To blunt the force of the market setback, Bunnings is also expanding its product lines into areas such as pet products and automotive maintenance.

That approach will seem somewhat justified if the downtrend ends up lasting the equivalent of three halves - FY2023/24 and the first half of FY2024/25. But if it extends beyond that, through all of FY2024/25, and even into FY2025/26, it will be seen as a more questionable move.

Not all of the category expansion is based on growing revenue by relying on "convenience" sales driven by foot traffic, such as Christmas gifts for dogs.

There are also expansions that one guesses might have originated with Bunnings' Marketplace, such as kitchen appliances.

Notably, as hinted at in Mr Schneider's remarks at the results announcement, engagement with TTI's Ryobi brand seems to be ramping up. At the same time, HNN is detecting some signs that the Bunnings captive sub-brand, Ozito, is being de-emphasised.

That's a smart move by Bunnings, because while Ozito and Ozito PXC might have attractive margins, it's a somewhat limited sub-brand as compared to Ryobi. That is in terms both of product range and product depth.

For example both Ryobi and Ozito PXC offer circular saws in the 150mm, 165mm and 184mm ranges, but Ryobi offers these in a "basic" model as well as its "HP" range. The latter provides a considerable performance boost, offering customers an easy path to upgrade, while retaining the same battery platform.

In terms of range, TTI has been hard at work with Ryobi over the years, adding tools that extend into craft and "upscaling" uses, as well as engaging with the Maker community (which often combines woodworking with electronics and 3D printing).

That said, there is a continuing question as to whether Bunnings is innovating its products at the same rate as eight or nine years ago. Adding brands isn't really a substitute for sourcing new and exciting products.

The Australian Bureau of Statistics (ABS) has released stats for hardware retail turnover through to August 2024.

Looking at these from the point of view of trailing 12-month periods (e.g., the period from September 2021 to August 2022 will be designated "p2022"), for Australia overall there has been mild growth of just over 0.5%. The month of August 2024 showed a mild improvement of 0.1% over August 2023 for the nation.

However, with background inflation running at over 3.0%, and some building products subject to continuing inflation, these increases equate to an ongoing contraction in the market.

Western Australia (WA) showed the strongest growth in percentage terms for p2024 as contrasted with the previous corresponding period (pcp), which was p2023. Turnover for the state increased by 3.7% and $102.9 million to $2863.3 million. In dollar terms, Victoria (VIC) increased turnover by $114.5 million to $6632.4 million, an uplift of 1.8%. Queensland also showed a positive result, up by 1.8% or $97.3 million to $5396.0 million. South Australia (SA) grew by 0.7% to $1761.8 million, an increase of $11.3 million.

The steepest fall for p2024 in percentage terms came from the Northern Territory (NT), which fell by 8.2% or $22.9 million to $255.4 million. The largest decline in dollar terms came from New South Wales (NSW), which fell by $167.4 million to $7472 million, a drop of 2.2%. Both Tasmania (TAS) and the Australian Capital Territory (ACT) fell by 0.7%.

New South Wales

Comparing August 2024 with August 2023, turnover for NSW fell by 1.5%.

As the chart indicates, turnover for p2024 in NSW only exceeded p2023 in September 2023, February 2024 and April 2024. The largest gaps were in November and December 2023, as well as June 2024.

Victoria

Comparing August 2024 with August 2023, turnover for VIC rose by 0.7%.

The strongest improvement for VIC occurred in September 2023, with an increase of 8.9% over September 2022.

Queensland

Comparing August 2024 with August 2023, turnover for QLD rose by 4.3%.

As the chart indicates, in QLD p2024 has consistently outperformed p2023 post December 2023. The strongest gain was in the usually subdued month of February in 2024.

South Australia

Comparing August 2024 with August 2023, turnover for SA fell by 2.6%.

While the August result was disappointing, SA has largely managed to track close behind its p2023 numbers in p2024, with six months tracking above the previous period.

Western Australia

Comparing August 2024 with August 2023, turnover for WA rose by 2.0%.

While the August results was a little disappointing, this followed on from four months - April 2024 to July 2024 - of results that exceeded the corresponding period in the pcp by a substantial amount. The peak growth took place in June 2024, up by 9.2% over June 2023.

Tasmania

Comparing August 2024 with August 2023, turnover for TAS fell by 4.7%.

As with QLD, the most improved month for TAS in p2024 was February 2024, up by 5.4% on February 2023. However, while turnover for p2024 has mostly tracked closely on average to p2023, the results for July and August 2024 show a downwards trend.

Northern Territory

Comparing August 2024 with August 2023, turnover for NT fell by 1.3%.

In the volatile world of the NT's hardware market, p2024 has significantly underperformed p2023. The difference was most marked for September 2024, which was down 15.9% on September 2023. That said, both July and August 2024 are closer to the numbers for p2023.

Australian Capital Territory

Comparing August 2024 with August 2023, turnover for ACT fell by 1.9%.

For the most part in p2024, after seesawing through the first four months, the ACT has tracked close to p2023. The largest month-on-corresponding-month fall, was for December 2023, with turnover down by 5.0%. The best increase was form September 2023, up by 10.4%.

Analysis

The "scoreboard" for the past five years shows a hardware retail market that is pretty much doing what the Reserve Bank of Australia (RBA) wants it to do - steadily declining against a background of inflation which, while remaining stubbornly above the target range, continues to fall.

As a result of this, Metcash released a snapshot of its performance since its FY2024 results which shows a continuing decline in its hardware business. While overall growth is up, driven by expansion and acquisitions, like-for-like (comp) sales are down 1.6% for Total Tools, and 3.7% for the Independent Hardware Group.

The statement accompanying these figures stated:

As noted in the Company's prior trading update (period to 8 September 2024), the external market for the Independent Hardware Group (IHG) continued to be very challenging with Trade activity softening even further. It was also noted that retail store margins in IHG were facing pressure due to the impact of lower volumes on fixed costs. Since that update, there has been additional margin pressure in retail stores in September and October, particularly in Trade due to further sales weakness.

This weakness in retail store sales has been offset by lower-margin wholesale sales. Metcash is responding to the weaker trading conditions in Hardware by implementing additional cost management initiatives and accelerating its strategic initiatives to drive market share gains in both Trade and DIY. Cost initiatives have included a strong focus on all business expenditure, particularly labour, where there has already been a material reduction in hours.

The Hardware business remains ideally positioned to capitalise on any increase in market activity levels.

(It is so welcome to see such clear statements from Metcash, which truthfully reflect its current difficulties, as well as the potential upside in the near future.)

It is also useful to refer to just how far the market has come over the past four years or so, as reflected in this chart contrasting p2024 with p2020.

The real concern that HNN has for the market is the extent to which it is, under the surface of these stats, continuing to shift to a new alignment. We've spoken to a number of smaller retailers who are finding hardware retail very tough going at the moment - which, given the overall increase in market size, really should not be the case.

Part of what is happening is that the consequences of mismanaging the building industry over the past 12 to 15 years are beginning to become clear. The recent report by the Victorian Building Authority (VBA) into itself is highly negative, but not nearly as scathing as it perhaps should be. It's not just a matter of a lack of resources, a poor understanding by the people who work there of what they are supposed to be doing, poor performance of tasks such as assessments, and the imposition of impossible bureaucratic roadblocks (especially as regards freedom of information requests), it's also that the design of the VBA itself has not been fit for purpose.

What this means is that simply throwing money at building more homes, as well as setting desirable but fundamentally unachievable targets, is not going to fix the housing problem, nor necessarily see the hardware market return to above-average growth. It is going to take, optimistically, four to five years to fix many of the systemic problems in the building industry.

Outside of that are all the town planning consequences to consider. There are huge investments by various entities in the building and real estate industry in the current (broken) system of how building space gets allocated. Some of that is financial interest, but just as much is purely cultural. From HNN's perspective, what underlies these battles over space is largely the issue that Australia's major cities are now facing strong forces driving them towards some form of further decentralisation. That is less a matter of the now-permanent shift to a fixed percentage of hybrid-based work-from-home, and more a consequence of an ongoing decline in face-to-face meetings between businesses - there simply isn't the time for that.

All this means that those businesses in the hardware retail industry who think that a cut in interest rates will solve most of their problems are likely a little deluded. It will improve matters, but there is not going to be a return to a 2021 Covid-based boom.

Bunnings has provided a submission to a parliamentary inquiry into the price setting and market power of big box retailers, their negotiation practices and how they engage with suppliers.

The inquiry was called by Nationals Senator Ross Cadell, who sat in on the inquiry into supermarkets earlier this year that heard Bunnings had allegedly treated its plant suppliers like "slaves".

Senator Cadell told The Australian Financial Review (AFR) he wanted suppliers and smaller businesses to detail their treatment by big box retailers in inquiry submissions. He believes Bunnings "had to be investigated" over price gouging allegations.

They're only allegations at the moment. They are certainly, prima facie, interesting to me, and that's why we have this committee to interrogate them.

In response, Bunnings managing director Mike Schneider told the AFR the retailer takes its promise to beat any competitor's price seriously and critics would not find evidence that it had engaged in price gouging.

Mr Schneider said he was surprised by the claims (of price gouging), given the company had long advertised using the slogan "lowest prices are just the beginning". In the AFR, he said:

I had to read it a couple of times when I heard the words price gouging. To advertise using the word 'lowest' means we've got to do a lot of work to prove that.

Mr Schneider said the company invested "tens of millions of dollars" in a sophisticated pricing ecosystem to track competitor pricing and test claims that it had the lowest prices on items carried by other retailers. The business then invested tens of millions more to match competitor discounts and promotions.

Senator Cadell said Mr Schneider's comments were directed at Wesfarmers shareholders and would not dissuade him from examining Bunnings via a parliamentary inquiry. He told the AFR:

I think he's setting the baseline case for the financial markets and the stock exchange with what he says. He's got to do the right thing by his company and maintain investor confidence in his share price.

He's doing that and we will do the right thing by the Australian people and quiz him on it.

Mr Schneider said Bunnings' everyday low prices model also informed its operating model, which was designed to be low cost. He said that model explained why Bunnings stayed out of some product categories that were complex or costly, and why it preferred to pay staff above-award wages to ensure high retention of permanent employees.

While Mr Schneider said critics would inevitably find a dissatisfied supplier or former supplier given the size of his business, many suppliers had worked with Bunnings for decades. He said any parliamentary inquiry would be a "great opportunity to explain" the group's pricing approach and business model.

You don't want to hear [criticism], but it's important to listen to it and you understand it so that you can, if it is the problem, put it right.

The Senate committee will also look at whether big box retailers that sell grocery items should be included in the grocery code of conduct. Mr Schneider said Bunnings should not come under the grocery code of conduct as Senator Cadell had suggested but would adhere if required.

Brand relationships

Exclusive brands were discussed in the inquiry submission by the next biggest player in hardware retail, Metcash/Independent Hardware Group (IHG). Metcash claims the arrangements being locked in by Bunnings are problematic. Its submission said:

Our major competitor in hardware has exclusive arrangements in place with many national suppliers such as Ryobi, Irwin and Nylex. These brands were once available to consumers via the independent market and are now only available in the hardware channel via our major competitor.

Dominant market participants have the power to demand exclusive arrangements, detrimental to smaller independent retailers, suppliers and ultimately consumers.

The rise of exclusive brands in the tools space has also not gone unnoticed by independent hardware store owner, Frank Penhalluriack. He said they can lock customers into using tools only sold by one retailer, and make it difficult for his store in the Melbourne suburb of Caulfield to offer parts to customers who own these products. He told ABC News:

The batteries are compatible for that brand, but generally not between the brands.

Mr Penhalluriack said his store is struggling with lower margins as it tries to keep up with the larger retailers. For instance, it is currently selling a 15L tub of Dulux at the same price as Bunnings, at a very low margin. He said:

Our margins are squeezed down because we will match Bunnings' price. We can't afford not to because we don't want to have our customers going elsewhere.

I just fear that as too many of the smaller traders go out of business, then you will lose that competition. It's becoming very, very difficult, harder and harder.

Bunnings notes that exclusive brands are common in hardware retail, with Ozito having Bunnings and Metcash-owned Mitre 10 selling its range Rockwell. The retailer's submission said:

Whilst Bunnings uses exclusive brands to differentiate our offer, we do not use them to exclude operation of our lowest prices policy or as a reason to not apply our Price Guarantee.

Mr Schneider said exclusive supply relationships with brands such as Ryobi and British Paints were not only common in the global hardware sector, these arrangements were often required by large manufacturers.

ACCC

The inquiry comes as Treasurer Jim Chalmers announced new legislation to overhaul the country's merger rules.

The Australian Competition and Consumer Commission (ACCC) said in its submission big box retailers can acquire "significant market power" through large-scale operations and extensive supplier networks. It reiterated its limited power to control mergers, even where certain market share or market capitalisation levels are met.

The increased powers of the ACCC were introduced after concerns were raised by the competition regulator about acquisitions in the pet retail category. Specifically, Petstock made "a large number of acquisitions" that had eroded competition from small stores. The ACCC ended up ordering Petstock to divest 41 shops before Woolworths could take its controlling stake.

In the wake of the Petstock situation, the federal government is set to introduce laws that will require major merger and acquisition proposals to seek approval from the competition regulator.

Metcash also raised concerns that these merger powers don't go far enough. In its submission to the big box inquiry, Metcash said the ACCC should have "intervened" to stop Bunnings having "complete dominance" in a specific regional Queensland town, and that planning laws were failing to stop store openings that forced its smaller Mitre 10 hardware stores to close.

University of Sydney Business School retail academic researcher Lisa Asher told ABC News:

With big box retail, we've seen consolidation and expansion occur under single banners over a long period of time.

Ms Asher - who worked as a supplier to retailers for years before turning to academia - said a lack of competition is problematic because it increases the stand-over power that retailers have over their suppliers. She said:

When a retailer has a significant amount of market power, if anyone speaks out against them, there is fear of retribution. You could lose your business.

This fear is why Ms Asher doubts many suppliers to the big box retailers will front the looming inquiry.

While the big box inquiry may put more heat on big box retailers, Ms Asher isn't sure it will achieve much in the way of policy or law change.

The inquiry was called by the Nationals, which isn't the ruling power. The federal Labor government has already ruled out changes to powers that could help split up retailers that have gotten too big and powerful. Ms Asher said:

Suppliers need to know that if they speak up (to an inquiry that) something good could happen from it.

Hearings are expected before the end of the year, with the six-month inquiry due to report by February 2025.

New Zealand stores

"Opening Soon" signs for a new Bunnings store have gone up on fencing located at 1150 Cameron Road Gate Pa, Tauranga, a harbourside city in the Bay of Plenty region on New Zealand's North Island. It is located down the road from the local Mitre 10 Mega.

The signage comes about a year after a company linked to the Mitre 10 Mega store was fined NZD500,000 for engaging in anti-competitive conduct to prevent Bunnings from opening nearby.

Bunnings told the Bay of Plenty Times it was "looking forward to bringing a new, smaller format Bunnings store" to Tauranga.

Bunnings' overall investment for the new retail store was NZD23 million and "about 50 staff" would be employed. The retail space of the site was about 4500sqm including a nursery area, and there would be 80 car parks. The hardware retailer said:

We've started some works to prepare the site for construction and we're hopeful of a mid-2025 completion date.

Court documents show Bunnings acquired the site in 2018 for NZD7.9million.

In 2019, NGB Properties Ltd, the then sister company of the Mitre 10 Mega Tauranga operator, bought the site next door. After an investigation, the Commerce Commission accused NGB Properties Ltd of putting a covenant on that site preventing it from being used as a hardware store, to stop Bunnings from opening. In 2021, the covenant was lifted and the site was sold to another party. NGB Properties was fined NZD500,000 in the High Court at Wellington last year after admitting the covenant breached the Commerce Act.

Tauranga Business Chamber chief executive Matt Cowley said Bunnings' Cameron Road development had advantages for tradespeople, retailers and shoppers. He told Bay of Plenty Times:

Firstly, it shows that brick-and-mortar stores are far from dead with significant investments like these happening across the country. Consumers still want to buy in store and take it away, unlike buying online and waiting for the delivery a week later. Having these two retailers aggressively compete in price is good for tradies and shoppers.

For transparency, Mr Cowley noted Bunnings was an alliance sponsor of the New Zealand Chambers of Commerce. He said having the two competitors operating nearby on the same road, was "market forces at play".

As long as there is a good selection of players in the local market, such as Placemakers, ITM, Hammer Hardware etc, the competition will be good for consumers.

Mr Cowley said Bunnings and Mitre 10 served a diverse range of customers, and not everyone was just after the cheapest item.

Consumers weigh up several factors, such as personalisation, service, range, convenience, as well as the best price.

Tauranga Mayor Mahe Drysdale said the proposed Bunnings store still had to go through the building consent process but represented "an exciting opportunity" for Tauranga's growing city.

Tauriko ward councillor Martin Rozeboom said it was especially "good news" for Bunnings customers currently having to travel to the Mount Maunganui store.

I'm quite in favour of having more competition between retailers and businesses as it gives shoppers a greater choice and the opportunity to compare prices.

He said he shopped at both businesses as each had a different range of items and healthy competition was good for everyone.

Bunnings already has a retail store in Mount Maunganui (almost 6km away) and a trade store in Tauriko (just over 9km away).

Bunnings Westgate

New Zealand's largest Bunnings Warehouse in Auckland's Westgate shopping park has been sold by property developer Ben Cook to property investment firm Investore for NZD51 million. The 16,000sqm branch sits on a 21,200sqm site.

Investore announced on the New Zealand Stock Exchange (NZX) that it had "entered into an unconditional agreement to acquire Bunnings Westgate, for an initial purchase price of NZD51 million, payable in cash".

The NZX statement said the Bunnings deal was expected to settle in December 2024.

The Westgate Bunnings had been listed with Colliers agents Blair Peterken, Josh Coburn and Shoneet Chand and first hit the market in November 2023. The agents highlighted in their marketing that the property was leased to Bunnings in December 2020 for 12 years and earned NZD 2.869 million plus GST per year in rental income.

The Aura Business Park at Baringa, a new suburb on the Sunshine Coast (QLD), will soon have a Sydney Tools branch. It is a 2200sqm site and located at 7-13 Carnegie Street. Sydney Tools development manager Alex Newby said the area was a good fit for the business. He told Sunshine Coast News:

[It] was a logical location to service the trade activity behind one of Australia's fastest-growing communities (Aura), as well as the established market of Caloundra.

Aura is a master planned community being established on 2,310 hectares south of Caloundra's urban area. It is expected to have a population of more than 50,000 people once fully developed.

Sydney Tools will join other businesses in Aura Business Park including Mitre10, Samios Plumbing, Carpet Court, Bridgestone and Ultra Tune. Since the first stage of the business park was delivered in 2018, more than 100 tenancies have been completed.

Caloundra Chamber of Commerce president and RWC Northern Corridor Group director Michael Shadforth said there was great demand for retail in the area, which will soon have road upgrades.

The economic landscape of the Sunshine Coast today is undeniable and has it squarely on the radar of national developers and businesses alike. We are now seeing the community surpass the demographic catchment triggers of more and more national retailers and trade service businesses.

The Aura Business Park has reached a critical mass where the businesses are starting to feed off the activity of each other.

We have seen this pattern play out time and again across the northern corridor in the past, with business parks like Warana and Kunda Park as well as North Lakes and Corporate Park further south.

Sydney Tools has an established store in Kunda Park, approximately 27km away from Caloundra.

Total Tools

Total Tools has signed a 10-year pre-commitment lease to move into a new greenfield site close to its existing premises in Bundaberg (QLD) next year. It is located at 63 Johanna Boulevard, Kensington in Bundaberg.

Head of retail leasing - Queensland for Colliers, Will Goldsworthy said Total Tools would benefit from moving into the much larger, prime location positioned in the main retail trade precinct. He told Bundaberg Today:

With the new site offering about twice their current footprint, this an opportunity for Total Tools to expand, taking advantage of the large Bundaberg trade market.

The large format retail market has seen significant growth since 2020, as demand has seen retail sales grow 25% above pre-pandemic levels. The site is strategically positioned with prominent frontage to Johanna Boulevard and will benefit from future infrastructure upgrades.

Colliers Queensland retail leasing associate director Sam Quintner said Bundaberg strong growth in population, economy and jobs which was driving the success of the large format retail market.

The opulation is expected to increase to 112,203 by 2041, an 8% increase from the current numbers. Mr Quintner said:

Total Tools has been a go-to in Bundaberg and this new site offers locals the opportunity for a larger footprint in the commercial area to accommodate the future demand, and within close proximity of the soon to be built $1.2 billion Bundaberg Hospital.

Related:

Data breach

In September, it was reported that Total Tools experienced a major data leak that is believed to have affected 38,000 customers. The data includes credit card numbers, email addresses and log-in details.

The tool retail group had been working on the data leak for a number of days after it first discovered unusual and suspicious activity within its IT systems. Total Tools chief executive Richard Murray said the company believed the cause of the data leak had been fixed, and has written to customers impacted by the incident. In The Australian, he said:

The cyber incident has illegally compromised certain personal information, however Total Tools is confident that the cause of this incident has been removed from its website.

The data that has been illegally compromised includes customer name, email address, Total Tools password, mobile number, shipping address, and credit card details of customers who shopped or registered on our website recently.

Mr Murray said that as soon as the company identified the potential impact of the cyber incident, its team, along with a forensic and cyber security expert, took immediate steps to secure its website and assist with the response.

We continue to work with this expert on this matter. Total Tools' communications to impacted customers recommended precautions they can take to lower the risk of their information being potentially misused.

In addition to contacting impacted customers, Total Tools also implemented several additional cyber security measures to minimise the likelihood of this occurring again.

Mr Murray also said Total Tools alerted the Australian Cyber Security Centre and Office of the Australian Information Commissioner to the cyber incident.

Related:

Wesfarmers-owned Bunnings will launch a retail media business as a way to diversify revenue and improve profits.

Retail media refers to new sources of revenue for retailers that can use their customer data to sell targeted advertising to shoppers, either on their websites, in their own branded magazines, on social media, YouTube, or in-store on screens or on the radio.

For many retailers, it's a way for them to connect their shoppers with brands. The revenue comes from suppliers looking for a bigger in-store marketing presence.

According to the Australian Financial Review (AFR), Bunnings had been searching for a technology partner for its planned retail media business. An industry source also told the AFR that Bunnings already generates an estimated $150 million in annual trade marketing revenue.

In the US, big box retailer Home Depot works with retail media technology provider Pentaleap and uses the Vantage platform.

The AFR also reports that Morgan Stanley estimates the Australian retail media market is valued at $1.6 billion and will grow to $2.8 billion by 2027.

Co-founder of media consultancy Sonder, Jonathan Hopkins, said Wesfarmers' exploration of a retail media offering makes sense given the large trove of first-party data it has through its OnePass and Flybuys loyalty schemes. He told the AFR:

Data is a retail media network's secret sauce. They have vast foot and website traffic across their brand portfolio.

In another report, media companies Nine Entertainment and oOh!media, have pitched to work with Mitre 10 owner Metcash to monetise advertising in and around its stores. At an investor day this year, Metcash predicted its retail media network could drive new earnings of $30 million by 2029.

Related

Home Depot retail media

Earlier this year, the home improvement retailer held its first "InFronts" event where it gave suppliers an inside look at data it gathered on consumer insights, and business strategies to grow its retail media advertising channel.

The InFronts is an in-person marketing summit modelled after Upfronts and Newfronts presentations hosted by traditional and digital media companies.

At the event, Home Depot detailed its systems, reporting and measurement capabilities, and the new products and partners to expand its retail media network. Melanie Babcock, head of Home Depot's retail media business, said:

It's an educational moment for that supplier, because as they think about investing into retail media networks, where do they want to invest? They want to invest with a retailer that aligns to their own objectives and is in a growth position.

At a recent panel organised by US based Advertising Week, Ms Babcock said:

We have thousands of small suppliers who may only have one to three products ... and they don't know anything about how to buy an ad, so we have to help them succeed inside of Home Depot.

We have to think about everyone from the big guys all the way down to the small and we believe Orange Access provides this capability for every supplier at Home Depot to be successful.

On the same panel, Aran Hamilton, CEO of Vantage said:

Retail media is no longer a siloed business on the side of retail. It is becoming an integral part of the overall retail business model.

Chicago-headquartered True Value has entered into an agreement to sell substantially all of the company's business operations to industry rival Do it Best for USD153 million.

To complete the sale, True Value and some of its affiliates initiated voluntary Chapter 11 proceedings in the US Bankruptcy Court for the District of Delaware, according to a company press release.

True Value said it will continue its day-to-day operations serving 4,500 independently owned retailers while going through the voluntary Chapter 11 proceedings.

True Value stores are independently owned and are not a part of the Chapter 11 process, with the exception of the company-owned store in Palatine, Illinois.

Prior to bankruptcy announcement, senior vice president of retail store development at True Vlue, Eric Lane spoke to Hardware Retailing exclusively about its then-newly launched corporate-owned store program. He said:

Now that we've done the one store, we've announced more broadly that we are in the business of acquiring stores. We have a pipeline for future acquisitions, and as we roll into 2025, I would say it is a geographic acquisition strategy. We want to build scale in a region and build a model around our distribution network, which helps us from a service perspective in terms of having a regional manager and regional staff members.

Our goal would be to retain as much of each store's staff as possible, but have a regional manager running that region who can bring operational discipline to help the stores be successful.

Bankruptcy court filings detail True Value facing a significant cash crunch as the housing market stalled and consumers became picky about discretionary purchases. It has between USD500million and USD1billion in total liabilities, Reuters reported, citing its bankruptcy petition. True Value CEO Chris Kempa said in a statement:

After a thorough evaluation of strategic alternatives, we determined that the sale of our business was the path forward to maximize value and best serve our retail partners and other stakeholders into the future.

Do it Best is a member-owned hardware, timber and building cooperative and states it is the second-largest co-op in the industry with over USD5 billion in annual sales.

As part of the proposed deal, Do It Best agreed to assume certain liabilities as part of the deal, including up to USD45 million in administrative claims. The company also agreed it would hire some of True Value's employees as part of the deal, though court filings did not specify how many. Do it Best CEO Dan Starr said:

Do it Best has a proven track record of driving profitability through the most efficient operations in the industry. This acquisition, if consummated, would provide True Value and independent hardware stores the strongest opportunities for growth for years to come.

True Value said it expects the completion of the sale by the end of the year.

PPG

PPG said it agreed to sell its architectural-coatings business in the US and Canada to private equity firm American Industrial Partners for USD550 million, and outlined a cost-reduction program which will affect about 1,800 employees.

The transaction, subject to regulatory approvals, is expected to close late this year or in early 2025, executives said. On a call with investors, PPG said it will net about USD450 million in cash to the company.

PPG's goal is to eliminate USD175 million a year from its costs, which will involve closing some facilities.

The pending sale of the paints business to American Industrial Partners caps a monthslong strategic review process at PPG that also included the sale of its silicas business earlier this year.

The transaction includes manufacturing facilities; distribution centres across the two countries; and assets at more than 15,000 sales locations, including 750 PPG-owned stores, 6,600 independent dealer locations, and 8,100 major home improvement centres and retail stores.

Freeing itself from the North American paints business will help the company refocus on its high-growth areas like aerospace and infrastructure, while it waits for automotive and industrial to rebound, the company said.

The paint and coatings manufacturer said the sale of the businesses is expected to close in late 2024 or early 2025 and is aimed at boosting organic growth.

The company reported total sales of USD18.2 billion in 2023.

DIY retailer B&Q has launched a refurbished tools range and expanded its tool hire service as it looks for more ways to cater to shoppers.

Products under its "Refurbished by B&Q" line have been sourced from customer returns and processed by the retailer's technicians to ensure they meet "like new" standards. These products, which have been component checked and thoroughly cleaned, are sold at a discounted price on the retailer's website, diy.com.

B&Q - owned by Kingfisher - has also expanded its tool hire service, offering customers a choice of over 100 products to hire. The retailer's category director of building Steve Lodge explains:

At B&Q, we want to make it easier for our customers to complete their projects and help them make decisions they can feel good about - whether it be through affordable prices or minimising waste.

The new Refurbed by B&Q range allows us to give new life to something that would otherwise be discarded, and our expanded Tool Hire service offers a great and trustworthy choice for consumers.

Another Kingfisher retail brand, Screwfix which is focused more on trades, also has a refurbished tool range as a way of keeping products in use for longer. Sustainability manager, Olivia Green, said:

Something we realised is that we get return products back and we're always trying to reduce some of the returns we get. But we're always going to get some. But rather than recycling those products and losing that potential, we've started to refurbish them back into a working product and sell that by the Screwfix website for secondhand and discounted rates. That's been great way of getting the product back into use, back into life and avoid the resources needed to make a brand new one.

The customer response to refurb has been incredibly strong and we consistently have demand for our refurbished products, exceeding the supply of them, which is a good thing because it keeps the return rates low...We've not really had to do any marketing of our refurbished tools. They just sell out as soon as they're on our website.

From a customer's perspective, they get a tested, good as new product. It's got a one-year warranty from Screwfix, and it's cheaper than a brand-new version.

Store closures

Garden centre chain Dobbies said that 17 outlets will shut down, saying they are unprofitable. The restructuring plan will take its store count down to 60 shops in a bid to "address historically uneconomical rent costs and ensure a return to sustainable profitability".

In September, supermarket group Sainsbury's announced it is taking over 10 Homebase stores and converting them into supermarkets.

The Homebase stores will grow Sainsbury's supermarket coverage across England, Northern Ireland and Scotland. Once converted, the retail floor area of the leasehold stores will range from approximately 15,000 to 40,000 square feet.

The first of the 10 stores will open next June, with the aim to convert all new sites by the end of 2025. The gross investment value of the acquisition is expected to reach approximately GBP130 million. GlobalData lead analyst Emily Salter said:

The DIY market fell by 0.3% in 2023 as consumers had already made any improvements to their homes during COVID-19 lockdowns, and due to the weak housing market and low consumer confidence for purchasing big-ticket items. These trends continued into the first half of 2024, impacting DIY demand.

Dobbies is thought to have faced another difficult year after racking up losses of GBP130m last year driven by high inflation and unseasonable weather dampening sales.

The Australian Bureau of Statistics (ABS) has released hardware retail turnover stats to June 2024. The trailing 12 months to June are equivalent to the Australian financial year, so we will be referring to these as FY periods.

As the chart below for retail sales across Australia shows, while the year has not been regarded as being an especially good one for retailers, nonetheless record levels of sales were obtained in four out of the 12 months, and in another two months (July 2023 and April 2024) sales reached the previous equivalent high.

However, with the Consumer Price Index (CPI) running at 3.8% through the FY, it is likely that sales have, in real terms, declined significantly. We say "likely" because the true inflation figure for the year is tough to work out, and we will not obtain a better view of this until the National Accounts figures come out in early September 2024. We've already seen the effect of this in some FY reporting by listed retail companies, where sales have nudged upwards, and earnings before interest and taxation (EBIT) has fallen significantly.

In terms of winners and losers for FY2023/24, New South Wales (NSW) and Victoria (VIC) stand balanced, in dollar terms. NSW is the biggest loser for the year, down by $156.9 million, or 2.1% on the previous corresponding period (pcp) which was FY2022/23. VIC gained $153.0 million, a lift of 2.4% on the pcp.

In percentage terms, Northern Territory (NT) was the sharpest loser, down 9.6%, or $27.1 million on the pcp. Western Australia (WA) showed the steepest rise, of 4.0% or $110.5 million. Arguably, WA was the outstanding state in terms of overall performance for the FY.

Outside of NSW and NT, there were no other declines. South Australia (SA) grew revenue by 0.93%, Australian Capital Territory (ACT) went up by 0.9%, Tasmania (TAS) was positive 0.6%, and Queensland (QLD) was up 0.44%.

Overall, Australia saw an increase on the pcp of 0.5%, or $127.8 million.

New South Wales

It's not surprising that NSW follows the national numbers fairly closely, in that it is the single largest contributor. The two main differences are slightly higher numbers for September 2023 and April 2024.

Victoria

VIC saw revenues for FY2023/24 above the pcp for 10 out of 12 months, with all-time highs for five months: August through October 2023, January 2024 and May 2024.

Queensland

Perhaps the most interesting characteristic of the QLD chart is the stability that has developed over February to June 2024. Both FRY2020/21 and FY2021/22 were volatile in that period, and FY2022/23 had some volatility, but the recent FY is quite stable. That period also saw FY2023/24 well above the pcp, where for the rest of the FY it underperformed, or tracked closely to the pcp. All-time highs were reached in January and February 2024.

South Australia

SA's revenues for the reporting period closely followed those of the pcp, except for higher levels during September and October 2023. Technically, revenues hit all-time highs for eight out of the 12 months, but for both July and August 2023 revenues just nudged ahead of those months in 2022.

Western Australia

Every month of FY2023/24 outperformed the pcp, though December 2023 figures were very close to those of December 2022. The state had a particularly stronger than usual finish to the FY from April through June 2024.

Tasmania

Turnover in TAS followed the pcp very closely, though with a significant drop in December 2023. The state set all-time highs for revenue in April and May 2024, and just nudged ahead of February 2022 in February 2024.

Northern Territory

While FY2022/23 was a relatively good year for the NT, FY2023/24 was less so. The latter underperformed the latter for every month (though February 2024 was close). Instead the FY tracked closely to FY2021/22.

Australian Capital Territory

ACT set all-time highs from July to October 2023. After that, the territory closely followed the pcp, with the exception of December 2023, when it underperformed significantly.

Analysis

The chart below shows the percentage change in retail turnover.

While VIC has done well in FY2023/24, it could be argued this is something of a belated compensation for its poor performance in the two preceding FYs. WA remains the only state to have truly indicated growth during the reporting period.

There have been a number of indications that early results from July 2024 indicate a further downturn in hardware retail revenue. Once again, we need to restate the fact that this downturn has been deliberately engineered by the Reserve Bank of Australia (RBA), with the intent of bringing inflation back into the 2.0% to 3.0% range.

While there have been some rather lightweight suggestions by more fringe economists that this is somehow unnecessary, it is clear this is only responsible path to take. Experience in the US economy, where inflation rose even higher than in Australia, indicates that it is both possible to bring inflation down, and to do so with minimum stress on other aspects of the economy, such as employment.

Of more concern, structurally, is whether the high level of spending during the COVID pandemic will prove to be not merely episodic, but in part a bringing forward of expenditure, and hence leave a kind of "hollow" in future hardware retail spending. Though what is more likely is a series of "mixed" trends, where that plays a part as does further expansionary spending. This will likely vary across categories, with spending in "essentials" actually boosted, while more "discretionary" categories slump.

Independent hardware retailers are going to struggle over the next two financial years (FYs). That will be a result of two major forces: a declining market, and actions from the two major corporate players in the market, the Wesfarmers-owned Bunnings and Metcash's hardware division, which consists of the Independent Hardware Group (IHG) and Total Tools.

The equation for Bunnings is simple: growth in its prime DIY market is slowing, and even contracting. At the moment the least expensive expansion opportunity is in trade and commercial, with a side of industrial. We can expect the big box retailer to go harder in areas such as truss manufacture, where it has already introduced highly automated assembly plants. And remember, this is the company whose ultimate head, Wesfarmers managing director Rob Scott, referred without exaggeration to its investment in Tool Kit Depot as being basically "a rounding error".

On the Metcash side of things, while its hardware division did run into a rough patch for FY2023/24, it will really ramp things up business in calendar 2025. What we expect to see is a shift in strategy from defining growth in terms of the number of stores in-network, to figures that relate both to genuine growth in desirable markets, an a greater attention to profitability per store.

We also expect Metcash to turn up its acquisition strategy, making two or three purchases each year of really significant hardware store mini-chains. As far as Total Tools is concerned, one of the reasons Metcash hired one of JB HiFi's best former executives is they realise boosting trade tool sales is very much about marketing and developing truly compelling offers.

We all know that one thing independent hardware retailers love doing is running down the corporate opposition. In reality, however, the only number that comes out of either Metcash or Wesfarmers that matters is the topline total revenue. That's the measure of how much marketshare they get. If it becomes a game of who can hold out for the longest at a lower level of profitability, the big guys are pretty much going to win.

So what can independent retailers do? One of the major advantages they have is that many suppliers are not only on their side, but they are, today, developing and marketing products that are specifically aimed at boosting business for independent retailers.

HNN thinks these products are really not getting the exposure and attention they deserve, so we thought we would try to give some of them a bit of boost. These are our first round picks from the goods on display at the 2024 HBT Conference Tradeshow.

Senix Tools

HNN has said for some time that the advantage Bunnings enjoys through its exclusive Ryobi brand tends to be underrated. While it is often dismissed as being an under-specced DIY brand, the reality is it provides a near-perfect value-for-money curve not only for the slightly serious DIYer, but also for professionals in trades such as building maintenance.

While there have been several attempts to slot something into that space for independents, such as Kincrome's Katana brand, none have really had an approach that worked.

Senix looks like being the brand that finally does it. The modern origin story behind the Techtronic Industries (TTI) brands Ryobi and Milwaukee Tool (as well as Ridgid and AEG) is that they arose out of suppliers in China's Pearl River Delta that made tools for major brands such as Stanley Black & Decker. Senix is essentially doing the same thing, only in relation (un-confirmeed sources have indicated) to TTI itself.

One product highlighted at the HBT Conference is the 60 Volt Max 53cm Cordless Brushless Mower, available both in push and self-propelled models.

Its seven-position single point height adjustment lever tailors grass cutting height from 40-100mm. It features both a mulching side discharge for clippings, as well as a bagging facility, using a 65 litre bag. It delivers 65 minutes of runtime on a single charge with the included 60V 8.0 Ah battery.

What the numbers don't tell you is that this mower has a great "store presence". It's a bit of a monster of a mower, but the design has the crisp lines you would expect from a mower designed primarily for the North American market.

Gorilla Ladders

With Bunnings launching its Citeco line of value ladders for trade, Gorilla has clapped back with a boost in design that adds both lightness and improved durability to its aluminium ladders.

Better engineering has reduced the amount of aluminium used to construct the ladders, making them lighter.

Changes such as dropping the height of the lowest step have helped to boost structural rigidity, make the ladders less likely to become deformed and fail.

Unipro

Long a favourite of independent retailers, Unipro is lifting its profile above its utility range of painting tools and accessories, with the introduction of its Professional lines of accessories.

Its Professional Handcrafted brushes have a range of features to boost their performance over more standard brushes. This includes a taper that is 30mm instead of the standard 20mm to increase paint holding capacity, as well as a higher percentage of Poly Butylene Terephthalatel (PHT) filament mixed into each brush head, which helps to deliver a better paint finish.

The brushes come with a range of display options, including an on-counter wire rack.

Wagner

Wagner is launching its "light trade" range of paint sprayers and accessories. It's a range that features Click & Paint, a way to simply and rapidly change or add accessories to spray painters with a simple twist. The range is aimed specifically at independent hardware retailers.

The Wagner Flexio Elite features an adjustable spray jet width, variable delivery rate and variable airflow, making it possible to set up the ideal rate of application. There is a Universal Extra Extension, which adds 60cm length to the sprayer, making it easy to reach both the top and bottom of walls in a single sweep.

The Flexio Elite has a 630W motor, a max flowrate of 500ml per minute, and weighs just 1.7kg.

Work has begun on the Portland North Employment Precinct in regional Victoria that will feature a new Bunnings store as an anchor tenant. Construction of the store will span 5,300sqm and have 120 car parking spots when it opens in 2025. Bunnings regional manager Dave Roddis said:

This investment will enable us to serve the growing Portland region which our team is excited about, and we're pleased construction is underway.

The precinct has been made possible by $2.5 million in funding from the Allan Labor Government's Portland Economic Diversification Plan, as a way to boost local jobs and economic growth.

The Labor Government said its investment in the precinct including upgraded drainage and road infrastructure has been instrumental in attracting this major investment to Portland.

Preliminary works, including the construction of an access road on New Street, are underway with expected completion by the end of the year.

Led by Regional Development Victoria, this project marks a milestone in the ongoing development of Portland as an industrial hub. The project is a part of the government's record $45 billion investment since 2014 in projects and programs that support regional and rural Victoria to be an even better place to live, work and stay. In a statement, Minister for Regional Development Gayle Tierney said:

The arrival of Bunnings at the Portland North Employment Precinct will drive economic growth, create more local jobs, and position Portland as a hub for major employers, benefiting the entire Great South Coast region.

Glenelg Shire Mayor Karen Stephens said:

The Portland North Employment Precinct has been a long-term project that is starting to come together. It is an engine room for jobs and Bunnings will certainly provide those when it opens, with more than 50 ongoing jobs in addition to around 50 during construction.

According to a report in The Warrnambool Standard in 2022, Glenelg Shire Council had received a planning application for a Bunnings store.

Related

"Blueprint" for 2025

In its new fiscal 2025 plan called "Better Together", Bunnings will address the perception of alleged mistreatment of a number of its (mainly greenlife) suppliers following the public criticism it received from during the Senate supermarkets inquiry earlier this year.

The inquiry heard from aggrieved plant, flower and nursery businesses, and Bunnings, Woolworths and Coles were reprimanded in the inquiry's final report.

The plan details how the hardware retailer will deepen current supplier links and focus on the better use of store space, improved stock flow and productivity, reports The Australian.

There is also a focus on a more seamless offer for shoppers as they switch between channels, in store and online. In a letter to suppliers seen by The Australian, Bunnings chief customer officer Rachael McVitty and chief operating officer Ryan Baker wrote:

Later this month we'll celebrate 30 years since the opening of our first warehouse store in Sunshine, Victoria.

A lot's changed over that time and there is plenty that has stayed the same, but one consistent part has been our relationship and shared success with our suppliers and partners.

We have also kept a focus on deeper trust and partnerships with our suppliers. So many of our suppliers have longstanding relationships that have seen mutual growth over decades, and we don't ever take that for granted.

The "Better Together" theme is about looking for a better connection with suppliers and staff. The Bunnings letter to suppliers also said:

The outcome of this plan will be determined by how we bring 'Better Together' to more than just a slogan.

We met with 1200 team members last month to launch the plan and said to them that all of the focus points will have a key lead and will mean different outputs to different teams.

Innovating and expanding our ranges are led by Merch (merchandise team) but can't be achieved without input and offers from suppliers, then having those products marketed correctly and making sure team are trained and excited to fill the bays with stock and correctly answer customer questions.

While there will be a focus on reducing injuries, which will include looking at how products are packaged and designed to improve safety considerations, innovation will be driven by working closer with hardware suppliers.

As Bunnings changes its store layouts to take in new categories such as pets and expanded offer in home cleaning, it is seeking to capture better productivity and a better experience for the shopper in 2025. The letter said:

Better use of space or seamless customer offers across all channels will only work if Bunnings share that information and decision process with suppliers.

Improved stock flow, handling and deliveries has the potential to deliver big benefits, but will require collaboration from our stores, logistic companies, distribution and fulfilment centres and of course suppliers.

Related

British outdoor clothing and equipment retailer Mountain Warehouse plans to open four new stores in Australia by the end of the year. It launched its first Australian store as part of DFO at Skygate in the Brisbane Airport (QLD) in July 2024.

The retailer positions itself as a low-cost family focused alternative to Kathmandu, Macpac, Anaconda and The North Face. Prior to the Brisbane store, it has been operating an online presence for the past seven years, annually turning over about $10 million.

In the second half of 2024, Mountain Warehouse will open stores at DFO Moorabbin, DFO Essendon and DFO Uni Hill in Melbourne.

Established in 1997, Mountain Warehouse will have more than 400 stores around the world by the end of the year, mainly in the UK, with about 50 in Canada, a small presence in the US and stores in Poland, Germany and Austria. New Zealand is currently its third-largest market with 24 stores.

Mountain Warehouse has men's, women's, and children's clothing as well as footwear and equipment. About 30 per cent of its turnover is currently from online sales. In the beginning it was a multi-brand store selling other brands' products, but it transitioned away from that and now only sells its own brand.

The new Australian stores are part of a global rollout of 50 stores in 2024.

London-based founder and chief executive Mark Neale said Mountain Warehouse's range is different to its rivals and many products were up to 30% cheaper than comparable goods sold by the opposition. In The Australian, he said:

Our offer is a bit broader than some of the other guys and its definitely better value for money. That's always been our positioning. It's more of a family offer. We sell a lot of kidswear. Most of the other guys who you might think of as in our competitive space have pictures of guys with an ice axe hanging off a glacier. It's about value for money. We have pictures of a family taking their kids for a walk with their dog in the woods.

Mr Neale would not make any specific forecast about its new Australian business, which he said will have "the full offer" including a summer range of shorts, T-shirts, thongs and travel-related products such as backpacks.

We will see how the four stores go and if they get off to a good start we'll be looking at more next year as well as a distribution centre in Melbourne.

Six years ago, we opened a store in Queenstown New Zealand and we didn't know whether that would be one-of-one or one-of-many and it went well. In six years, including three during the Covid pandemic, we built it out to 24. There's a lot more people in Australia than in New Zealand so we'd like to think we will do more than that.

In 2018, UK-based private equity firm Inflexion took a 20% stake in Mountain Warehouse for GBP45 million, which is helping to fund its retail expansion.

In an interview with Retail Gazette, group AI director at Kingfisher Mohsen Ghasempour explains his team's efforts have been focused on creating initiatives that improve customer experience and internal operations - many of which have helped to increase sales under each of the group's banners.

(Kingfisher is the parent company behind UK retailers B&Q, Screwfix and French brand Castorama.)

Hello Casto is the first AI-powered assistant in the home improvement industry that uses generative AI to help customers with their DIY projects. Mr Ghasempour said customers can use the online tool, which is currently available at Castorama France, in their "natural language" to ask DIY related questions that they might typically ask a sales assistant in store.

When you talk to Hello Casto, you explain your problem, 'I want to remove my old wallpaper', and then our agent will tell you 'you need wallpaper remover, you need this part of product, you need this and you need that to do your project'.

It's quite new and we have to educate both internally and people to use this technology, but it's one that's potentially going to have a very big impact on the younger generation, especially those getting into DIY because we're providing that level of advice digitally to our consumer.

Mr Ghasempour said the team is working on launching an English version of the assistant for B&Q and Screwfix.

Product recommendations are also a key area. Last year, Kingfisher launched a suite of "best product" solutions for its app and online, as well as in multiple formats such as "frequently bought together" carousels, "substitute products" or direct personalised offers based on customer shopping trends and preferences.

For B&Q, where the solutions have been in place the longest, more than 10% of its ecommerce sales had come from product recommendations.

On top of that, its own recommendation engine had driven a more than 100% increase in online sales from product recommendations compared to its previous third-party solution.

Mr Ghasempour said it uses machine learning technology, which has been trained from the group's product data and sales history, to deliver the right recommendations.

The algorithm can also spotlight a very similar product if the one it would typically recommend is out of stock - something its previous third-party solution was unable to do.

Internal efficiencies

Mr Ghasempour notes the potential to use AI in the supply chain is huge, as there is "so much manual effort going into that process".

At the moment, Kingfisher uses AI for demand forecasting - predicting the quantity of products consumers will want - as well as working out how to clear stock in a more beneficial way for the business. Mr Ghasempour said:

About 12 to 18 months ago, we started a big project around mark down and promotions for B&Q [looking at] using technology to identify the best route to mark down a product.

When you want to mark down or get rid of a product, it's very important for you to understand discount you can put on the product and what period you have to leave it for.

The pilot tested in the first half of last year delivered encouraging gross margin improvements, while increasing the sell-through of seasonal stock and improving the efficiency of range changes.

Similar technology is being used for promotions, which combines demand forecasting and optimisation to provide "the best price for Kingfisher's customers", he said.

In our major strategy issue, HNN looks into the plans of the Wesfarmers-owned Bunnings, Metcash's hardware division (including both Mitre 10 and Total Tools) and the HBT National Buying Group.

Download here:

The most recent Wesfarmers Strategy Day in May 2024 proved to be a somewhat feisty event - in a good way. While the background of high inflation competing with unexpectedly high interest rates from the Reserve Bank of Australia (RBA) has seen retail spending curtailed, Wesfarmers has pushed ahead with its medium- and long-term vision. Central to this is OneDigital, we see Wesfarmers as one of the few large Australian companies taking innovation seriously, and understanding we're on the cusp of seeing markets radically reshape themselves.

Wesfarmers managing director Rob Scott was, as always, steadfast in defending and explaining his strategy, while investment analysts provided a rare level of engagement. The result is almost a conversation about how Australian business should shape itself moving into what could be a radical shift in the future.

Similarly, Metcash's Investor Day, held in March 2024, revealed a radically refurbished company, that is set to undergo further changes during FY2024/25. There are new CEOs heading up both the Food and Liquor divisions, along with a new CEO starting at Total Tools. An interim CEO has been assigned to the Independent Hardware Group (IHG), with long-term hardware stalwart Annette Welsh stepping aside. Results for FY2023/24 full-year reveal good performance from Food and Liquor, while Hardware has lagged overall.

Metcash CEO Doug Jones provided a rare look into Metcash's "meta-strategy". This consists of the company developing well-defined strategic "plays", which it can institute across its divisions, to acquire, grow organically and expand markets.

At HBT National Buying Group, managing director Greg Benstead outlines where the buying group for truly independent hardware retailers is headed. Much of this means making both technology and professional advice accessible to its members, while pursuing its overall goals of increasing volume of orders through its preferred suppliers so as to gain maximum rebates for members.

Bunnings Warehouse Property (BWP) Trust has reported $180.2 million profit for the 2024 financial year, up from last year's profit of $36.7 million.

In The Australian, BWP said it recently bought two properties - the Southport Showrooms (QLD) and Broadmeadows Homemaker Centre (VIC) for $10 million and $20 million respectively - as it looks to expand.

These acquired sites afford potential options for Bunnings' expansion, over time, and enable additional income generation for BWP...

These deals added to BWP's $540 million acquisition of the listed Newmark Property REIT that was completed in June. The merger provided BWP with nine properties.

BWP is also re-purposing and re-leasing properties vacated by Bunnings. At Hervey Bay (QLD) it put retailers Amart and Super Retail Group into a site. It is also re-purposing the ex-Bunnings Warehouse property in the Melbourne suburb of Fountain Gate.

BWP has sold sites in Wollongong and Belmont in NSW, in Albany (WA) and is looking to sell a former Bunnings Warehouse in Port Kennedy (WA).

Established and listed on the ASX in 1998, BWP Trust invests in and manages commercial properties throughout Australia.

The majority of the Trust's properties are large format retailing properties, in particular, Bunnings Warehouses, leased to Bunnings Group Limited.

Blood pressure trial

NSW residents have a new way to conveniently check whether they have hypertension (high blood pressure) at a Bunnings store.

The "Shop2Stop Hypertension" research study aims to identify more people with high blood pressure - the top risk factor for death in Australia - and raise community awareness by placing SiSU Health stations in 30 Bunnings stores across NSW.

This innovative approach to detecting hypertension comes from The George Institute for Global Health and UNSW Sydney in partnership with SiSU Health.

Alta Schutte, professor of cardiovascular medicine at The George Institute for Global Health and UNSW Sydney, said:

Efforts to reduce the rate of high blood pressure in the community have stopped being effective over the past 10 years, and the profile of those affected is changing.

For example, raised blood pressure is increasingly linked to stroke deaths in men aged 25-49 years but they wouldn't think of themselves as being at risk. We needed to think creatively about reaching this and other groups at high risk, in the places they already go, and Bunnings stores are a great way to do that.

Doing a screening at a SiSU health station takes about five minutes. Customers are asked a series of questions about their age, lifestyle and family history, and given the opportunity to accurately weigh themselves, check their blood pressure and measure their heart rate. They can also sync up with the SiSU Health app to capture their results and track their progress. Prof. Schutte said:

The check is free, and the self-operated machines are in discreet locations, so it's only the individual who sees and hears their results in the store.

Importantly, the SiSU kiosk gives people recommendations on how to reduce their blood pressure and, if needed, directs them to see their GP straight away. The good news is that if someone finds out they have high blood pressure, it can be effectively treated with medication and lifestyle changes.

TradeMutt

Bunnings Trade announced a three-year partnership with social impact workwear brand TradeMutt, to raise funds and awareness for mental health support among tradespeople. It officially launched in late July with a National Funky Shirt Friday Brekkie, according to the Mi3 website.

The partnership aims to support the free mental health care counselling service, This is a Conversation Starter (TIACS), founded by TradeMutt creators, Dan Allen and Ed Ross.

Allen and Ross, both tradies, started TradeMutt after Allen lost a close friend to suicide. The brand's colourful work shirts are designed to spark conversations about mental health, breaking down barriers in industries where such discussions are often stigmatised.

Bunnings Trade desks nationally will display "TIACS for your toolbox" cards, highlighting how to easily access the professional and confidential counselling service.

Bunnings Trade x TradeMutt work shirts and water bottles will be available in-store at Bunnings Trade desks, with 100% of profits from sales going directly to TIACS.

Ben Camire, Bunnings director of operations & commercial, said the retailer is committed to improving mental health support within the trade community.

Many of us can be unsure on how best to start a conversation about mental health, so we've partnered with TradeMutt to encourage our team and customers to check in with each other and raise awareness and funds for TIACS, a valuable resource there to help tradies.

We are committed to improving mental health support within the trade community and know the positive impact the simple act of starting a conversation can make. Breaking down barriers so tradies feel comfortable reaching out for help will help drive cultural change in our industry.

Related

Product packaging

Bunnings is changing its packaging and storage of lead products after concerns were raised about customers and workers being exposed to the material in its stores across the country.

Officials from the Shop, Distributive and Allied Employees' Association (SDA) in at least three states have inspected sites and contacted work safety authorities. Vision and photos supplied to the ABC showing potentially hazardous dust gathering on shelving.

Bunnings told the ABC it received "expert advice" the way the product was sold poses "little risk" but it is updating packing and labelling as "an additional safety measure".

In a report to SafeWork SA, the SDA alleges the state's work health and safety laws were being broken, with lead sheets stored "without an appropriate container" or safe handling equipment.

The report also alleges because the lead products were not being kept correctly, they had rubbed together forming dust on the shelving.

Bunnings director of merchandise, Cam Rist, said there was "nothing more important" than worker and customer safety.

While we've received expert advice that confirms the way the product was sold poses little risk, we have worked with our supplier to update the packaging and labelling as an additional safety measure.

Bunnings has liaised with work safety authorities in New South Wales, Queensland and South Australia about the changes it has made and says no formal notices have been issued against the company.

Areas of stores where the products were kept have been cleaned with specialist vacuuming equipment, wipes and appropriate personal protective equipment (PPE).

In a statement, Workplace Health and Safety Queensland said follow-up inspections showed the products were "no longer on shelves".

A SafeWork SA spokesperson said products "only pose" a risk of lead contamination if they were handled unprotected.

This can be avoided by appropriate packaging and the wearing of gloves.

Mitre 10 has leased warehouse and distribution space in a former Masters Home Improvement store located in North St Marys, approximately 47 kilometres west of Sydney.

The property's owner is investment manager and developer Centennial which recently undertook a major refurbishment and expansion to reposition it as a logistics asset. Centennial acquired the facility for $35.3 million from HMC Capital (formerly known as HomeCo) in 2022.

Mitre 10 is leasing 4114sqm at 243 Forrester Road in North St Marys for an initial seven years, according to Real Estate Source.

Key features a warehouse area of around 3,725sqm including an open plan office space over two levels (383sqm).

The warehouse has high clearance up to 11m (approx.) with 10m wide awnings for all weather loading and access via four on-grade roller shutter doors.

It has an ESFR (Early Suppression Fast Response) sprinkler system throughout and generous hardstand areas, allowing for multiple larger vehicle movements.

There is flexible industrial zoning to suit a wide range of uses (subject to Council approval) and ample on-site parking, separated from loading areas.

The property is located within 2km of the Pacific National St Marys Freight Terminal and within 3.3km of the Great Western Highway and 5.4km of the M4 motorway.

It is also close to Sydney's major distribution centres, Amazon's Fulfilment Centre and the future Western Sydney International (Nancy-Bird Walton) Airport, which is on track to begin operations in 2026.

Tradelink

New Zealand's Fletcher Building has sold its Australian plumbing supplies and distribution business Tradelink for AUD170 million and said it will use that to repay debt.

The company announced it had struck an agreement to sell the business to Metal Manufactures, a subsidiary of United States-based Blackfriars Corporation.

Fletcher will get AUD160 million cash payable on the settlement at the end of next month, according to the New Zealand Herald. In a statement, it said:

There are no regulatory or other conditions to be satisfied to complete the transaction. The remaining AUD10 million will be a deferred cash payment based on achieving separation milestones. Separation is expected to take up to two years and be completed by September 2026.

Fletcher acting chief executive Nick Traber said they were pleased to have signed the Tradelink sale agreement, and to have achieved an "attractive outcome for both parties".

We believe Metal Manufactures is an ideal proprietor for Tradelink given their long and successful history operating in the Australian trade distribution sector.

According to The Australian, Metal Manufactures imports, manufactures and distributes metal tubing, electrical, lighting, data and thermoplastic products, security and monitoring equipment, and sign, digital and display solutions. It has more than 4000 staff.

The company's owner, Blackfriars, operates across the US building sector with interests in electrical, plumbing and plastics. Blackfriars in controlled by the low-profile US-based billionaire Colburn family.

In a statement to the ASX, Fletcher said that based on the forecast net sale proceeds, it expected to record a non-cash impairment of the Tradelink business of about $32.5 million in its 2024 financial year accounts.

Seven Group chief executive Ryan Stokes said it was interested in acquiring the BGC cement division and associated assets after spending $1.9 billion to buy out Boral.

In July, BGC confirmed that it was back on the market and expected to fetch more than $600 million in a sales process.

Mr Stokes said Seven wanted to expand Boral in WA and that the BGC business was a good fit. In the Australian Financial Review, he said:

We look to invest where we can see growth, in quarry, in our cement supply, as well as in our concrete batch plants. In WA, we would like to see how we can expand and that could be through organic means, it could be through inorganic steps.

Mr Stokes said it was clear the BGC assets could deliver on those ambitions, but it would come down to price and how it stacked up against alternative options.

In the past year, AdBri has been purchased by Irish group CRH, CSR has been bought by Saint-Gobain, while Seven Group purchased Boral, and BGC sold its plasterboard business to Belgium-based Etex in what has become a period of consolidation in the listed building materials sector.

Mr Stokes said the demand and supply imbalance in Australia's capital cities pointed favourably to greater home building activity.

We've had housing supply issues in every capital city, and it just highlights that we do need to see a step-up in housing construction. What gives us confidence is we look at the core issue - you've got record population growth and a shortage of supply. We know that that needs to be addressed.

BGC was up for sale in 2022, but buyers were unwilling to take on the family-owned company's loss-making home building unit. That part of the business has since been separated.

Related

Iplex pipes

Sydney law firm Baker McKenzie has filed class action against Iplex in the Victorian Registry of the Federal Court.

The case against Iplex Pipelines Australia Pty Ltd is the latest development in the saga, which has impacted thousands of WA homeowners.

The class action is on behalf of "all persons in Australia who acquired Iplex Pro-fit polybutylene pipe products manufactured using TYPLEX-1050Resin at any time from July 1, 2017."

Lead plaintiff in the class action, Tracey Watters, from Perth, said she had experienced 10 separate water bursts and leaks in the past four years. She told The West Australian:

These instances have caused damage to my property and possessions including ongoing damp and mould issues, and at times my family and I have had to relocate to alternative accommodation while repairs have been undertaken.

This has caused severe stress and anxiety for myself and my family, and I am constantly living with the uncertainty of when another burst or leak will happen.

Iplex is a subsidiary of New Zealand-based Fletcher Building, which denies its product is defective and blames pipe bursts on poor installation by builders, most specifically BGC Housing, which used Iplex's polybutylene pipe products extensively in its new builds.

It is understood the suspect pipes have been installed in more than 30,000 homes across the country.

Related

The hardware retail co-op group recently unveiled its new store model called "ELEVATE3 Ace" that focuses on the customer experience. This experiential format will roll out over the next five years in both new and current stores, supported with a USD1 billion investment. John Venhuizen, president and CEO, said:

Elevate Ace is not just a new store format, it's our vision to become famous for four things in the neighbourhoods we serve namely Paint, Power, Backyards & Barbeque, and Home Preservation.

We believe in the power of local, and this initiative strengthens our community ties by creating experiential spaces that are not only places to shop but also places to connect. Our neighbours will benefit from locally relevant, premium products, expert advice, and immersive retail innovation. With Elevate Ace, we are setting a new industry standard as we aspire to truly be the best, most helpful store on the planet.

Key features of the ELEVATE3 Ace store model include:

In an interview with Retail Dive, Dale Fennel, vice president of merchandising, said:

[We] wanted to create more than just a space where customers could come shop but a space in which they could connect.

We think that Elevate Ace is a fundamental change in our store model.

Experiential retail is "one of the absolute imperatives" for the company, he added.

The store will focus on the handful of brands and categories that are behind most of the company's current growth. Mr Fennel said:

We set out to really elevate those brands and create this immersive shopping experience that you can't find anywhere else.

Ace Hardware last updated its store design five years ago, and the industry has since changed. Mr Fennel said the company is working to improve the customer experience by offering extra training to frontline associates. These employees will be able to serve as brand advocates who can help walk customers through purchases. He said:

We really are focusing in on trying to understand what the customer wants, whether it be by brand or features and benefits, and serving up to them all the products that are available at Ace either in store or in the case of grilling, for assembly and delivery.

Ace Hardware opened 111 new stores through June and plans to open 200 by the end of the year, its 100th anniversary year.

Globally, there are over 5,800 stores in 60 countries. Elevate Ace will launch in 4,994 stores.

Ace's latest store growth has been fuelled by existing retailers opening additional locations, competitor stores converting to Ace, and new investors opening their first Ace Hardware store.

Its cooperative business model offers local entrepreneurs the ability to be owners of their local store operation, and also become one of a limited number of shareholders of Ace Hardware Corporation.

Digital shelf technology

Software through its digital shelf labels from VusionGroup is expected to provide rapid, real-time updates of pricing, ensuring accurate price management as well as LED displays in stores.

Ace Hardware plans for the partnership with VusionGroup to maintain high standards of customer service while modernising its retail network.

With over 5,000 locations across the US, the implementation of VusionGroup's technology will help streamline operations, allowing store managers and associates to be more agile and responsive.

This partnership also positions Ace Hardware to explore further advancements, such as out-of-stock detection and in-store media solutions.

The Australian Bureau of Statistics (ABS) has released its retail turnover figures for the period up to April 2024. For hardware retail they have largely continued the trends of the previous three months, which is to say that while there is limited positive growth, there has also been limited negative growth as well.

In looking at this data we consider them in terms of "periods" running from May to April. So "p2021" refers to the period from May 2020 to April 2021.

Contrasting p2023 with the current p2024, Australia-wide there has been only 0.03% of growth. That's basically flat, with the added caveat that inflation is running at an annualised rate of over 3.5%. To that we can add a "reverse" caveat that some building supplies are going through disinflation, which means the inflation rate for hardware retail is difficult to determine.

The largest percentage gain in revenue for hardware, contrasting p2024 with p2023, was Western Australia (WA), which increased by 3.3%, with revenue up $88.9 million for a total of $2824.2 million. In revenue dollars, Victoria (VIC) was the strongest state, increasing by $136.0 million, or 2.1%, with total revenue for p2024 of $6633.1 million.

Negative growth in percentage terms peaked with Northern Territory (NT), down by 8.0% or $22.5 million to $259.3 million. In dollar terms, New South Wales (NSW) had the steepest fall, down by $208.4 million to $7547.6 million, a drop of 2.7%.

Both Queensland (QLD) and Tasmania (TAS) were close to flat. QLD had a loss of 0.6%, or $30.0 million to $5323.9 million, while TAS had a gain of 0.6%, up by $3.3 million to $607.9 million. South Australia (SA) rose by 1.8% or $30.6 million $1769.7 million.

The Australian Capital Territory (ACT) managed a gain of 1.9% or $9.8 million to reach $538.7 million.

As mentioned above, Australia saw overall revenues lift by 0.03% or $7.7 million, to reach over $25.504 billion. This represents a gain of 24.9% from p2020 to p2024.

New South Wales

The April 2024 result for NSW could be seen as a slight improvement over the March 2024 result. It manages to be above the result for both p2023 and p2021, though it is below p2022.

The weakness in p2024 originates in the four key months from September to December 2023. For the rest of the 12-month period results track closely to p2023.

Victoria

As with NSW, the VIC result for April 2024 falls within the range of the past three years, slightly above the turnover recorded for the same month in 2021 and 2023.

In some ways, VIC has had the most unique pattern of pandemic and post-pandemic retail turnover. The peak period for VIC was p2021, whereas for most states it has been p2022 - the second pandemic 12-month period. For VIC both p2022 and p2023 saw a contraction in turnover. In fact, it is the state that has benefitted - in percentage hardware retail turnover growth terms - the least from the pandemic.

Queensland

The April 2024 turnover number for QLD has proved surprisingly positive, just nudging above the April 2022 result, to produce an all-time high for this month. Similar highs were reached in both January and February 2024.

South Australia

For SA p2024 has been very positive. Out of the 12 months, only four have trailed behind results for p2023, with the other nine months setting all-time monthly highs for the state. This includes the result for April 2024, which just bested the April 2023 result.

Western Australia

As with SA, WA has seen significant growth in p2024. In fact, every single monthly turnover result has set a new monthly high for the state. Contrasting with p2023, the April 2024 result - which was flat to the March 2023 result - exceeded its p2023 equivalent by the largest margin for the period.

Tasmania

Ever since October 2021, hardware retail turnover in TAS has followed a very tight pattern. Results for p2024 closely matched those for p2023 from May 2022 through to November 2022, then underperformed for December 2022. Since February 2024, the results have improved over p2023, with its April 2024 result setting a new monthly high.

Northern Territory

For NT p2024 has performed significantly below p2023, though somewhat in line with p2022. The April 2024 result has shown a significant improvement, after low turnovers from January 2024 to March 2024.

Australian Capital Territory

While p2024 started off well for the ACT, with new monthly highs set from May 2023 through to October 2023, November 2023 through to January 2024 saw it underperform both p2023 and p2022. However, from February 2024 through to April 2024 the results have been very close to those for the two previous periods.

Analysis

The general news reflected by the ABS hardware turnover results for April 2024 is that there has not been much of a significant shift since the previous year. Any real economic news for the sector will emerge with the results starting from August 2024. Those stats won't be available until October 2024.

The April results, however, provide an ideal position to look at the pandemic-based performance of the states and territories. While the initial pandemic surge in sales did take place in March 2020, April 2020 was the first full month in which the pandemic had its effect.

Also, it's arguable that FY2024/25 will be the first full year that isn't pandemic or post-pandemic. Instead, this financial year represents something of a switch back to "normal" - whatever that is going to mean. Which is to say that the traces of the pandemic in the economy - including higher commodity prices - are no longer transient and based on misalignment of supply chains. Instead, they are at least semi-permanent.

We can also reasonably expect the current elevated spending on hardware, the legacy of the pandemic "jump" of around 25% in topline turnover, to continue for at least over the next couple of years. Turnover might drop back to FY2020/21 levels, but even that seems unlikely with the ongoing demand for housing, and the centrality of dwellings in Australia's culture.

This focuses attention away from the fortunate increase in overall revenues, and towards the prospects for future growth. From that perspective, we begin to see the immediate future does not seem so bright as the immediate past.

Take, for example, the chart of period-on-period percentage increases for turnover:

Comparing the pre-pandemic growth for p2020 with the most recent period (p2024) there is a definite downwards trend (with the exception of TAS).

This can be further clarified by the chart showing these percentage change in a stacked bar format:

One surprise is the extent to which VIC has not benefitted as much from pandemic growth as the rest of Australia in percentage terms (excepting NT). But it is also evident that we are seeing a dynamic slowing in growth, and this seems likely to continue through FY2024/25.

From the immediate perspective of independent hardware retailers, this is concerning, but probably not so consequential. The increase in retail sales has given them a much needed lift and enabled smaller stores to reinvest so as to improve their businesses and reduce ongoing operating costs.

It is a different story, however, for the two major retail operations, Bunnings and Metcash's Independent Hardware Group (IHG). Bunnings in particular is under pressure not only because growth has slowed, but because other retail segments is parent Wesfarmers - notably Kmart - have managed to find growth even in a flattening market.

As HNN discusses in more detail in the upcoming issue of HI News, the core problem with Bunnings is that it has reinvested its "windfall" earnings boost from the pandemic, but those investments - Tool Kit Depot and Beaumont Tiles - are longer-term investments, and unlikely to generate contributory returns before FY2026/27. (That's actually a general problem that Wesfarmers is experiencing.) While additions such as a pet food and accessories line are helpful, rejuvenated growth in 2025 will likely require structural change.

For IHG the picture is somewhat different. With the exit of Annette Welsh as CEO of IHG, and the advent of a new (and highly competent) CEO for Metcash overall, much of the "moral imperative" to retain the initial framing of the acquisition of Home Timber & Hardware Group (HTH, aka Danks) in late 2016 has been lost. That framing was that the acquisition would be more about preservation than transformation.

In the new environment, with decreasing growth per-store, it's likely that IHG will increase its acquisition and joint-venture activities in its lead brand, Mitre 10. While this is, to some extent, "non-organic" growth through simple acquisition, it is also a structural shift from wholesale-only to wholesale plus retail margins.

A somewhat feisty debate has developed about what happens now and in the near future with renovations in Australia. The conventional view is that when dwelling construction activity declines, spending on alterations & additions (alt-adds) increases.

However, as we've often pointed out at HNN, we are not currently living in conventional times.

One factor that seems difficult for many to acknowledge is that the Reserve Bank of Australia (RBA) is determined to bring the inflation rate down to something under 3.0%. That means slowing the economy, and part of slowing the economy is slowing the rate of value growth in the housing market, as this represents inflationary consumption.

This struggle with inflation is something of a global condition, and includes the US, much of the EU, and the UK. One important contrast with economies such as the US is the rate of productivity growth over the past few years. To quote from a US Bureau of Labor Statistics press release dated 6 June 2024:

Nonfarm business sector labor productivity increased 0.2 percent in the first quarter of 2024, the U.S. Bureau of Labor Statistics reported today, as output increased 0.9 percent and hours worked increased 0.6 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the same quarter a year ago, non-farm business sector labor productivity increased 2.9 percent, the largest four-quarter increase since the first quarter of 2021, when the measure increased 5.9 percent.

Meanwhile, in Australia, according to a summary from the Australian Bureau of Statistics (ABS) for March quarter 2024 national accounts:

Labour productivity was flat. Output per hour worked was largely unchanged compared to the previous quarter and the March quarter 2023. Overall, we worked similar numbers of hours as the previous quarter, although hours worked in government-supported industries like health, education and social assistance grew faster.

Productivity is important because it represents the best "exit strategy" for inflationary economies. If you can make more for less, you gain growth without the creation of scarcities, and growth is likely to be channelled towards activities with higher productivity. Overall, that tends to be deflationary for prices.

Poor productivity growth narrows the options available to the RBA. It is perhaps worth remembering that in mid-2008, with the consumer price index (CPI) indicating that inflation was up around 4.5%, the RBA set interest rates at over 7.0%. What seems to have wiped this from collective memory is that from December 2011 through to March 2021 - just shy of 10 years - inflation as measured by the CPI remained below 3.0%, and from December 2014 to December 2019 it was mostly below 2.0% as well.

Given this history, current interest rates could easily be somewhere around 6.0%. The reason such aggressive interest rate rises are not in play is that the Australian economy overall is not doing well. That relates to the gross domestic product (GDP), which grew at just 1.1% quarter-on-corresponding-quarter for March 2024 - the continuation of a slide that started in December quarter 2022, and well below a desirable rate.

In close to simplistic terms, looking after the economy can be seen as something like looking after a lawn. If you put on lots of fertiliser (economic stimulus), the grass (economy) grows, but so do the weeds (inflation). If you put on weedkiller (higher interest rates) to get rid of the weeds, then the grass will also start to die. What works (somewhat) is a combined weed-and-feed supplement (productivity).

However, that weed-and-feed supplement seems to be in short supply in Australia. At the moment the only way forward for the RBA is to continue to apply the weedkiller in judicious amounts, so that the grass, though affected, does not actually die out.

A second factor at work is that since 2020 Australian society has come to - culturally - place a higher value on housing. The extreme COVID lockdowns were something of a shock, and it will likely be another couple of years before people stop - at least unconsciously - planning for the next pandemic. In particular, that has reduced the attractiveness of multi-unit dwellings, and thus created an even tighter market for detached houses.

Given all this, it would seem evident that the convenient cycle of "house construction goes down, alt-adds go up" is unlikely to be as much a given as it was in, say, the 2010s.

The dwelling market

What is the current state of the dwelling market? Perhaps the best stats to look at are from the ABS dealing with capital city dwelling markets. In this case we're using periods that consist of the June, September, December and March quarters, so p2022 runs from June 2021 through to March 2022.

Median house prices

Let's start by taking a quick look at the median house price for capital cities.

To summarise these charts briefly, there are two separate trends evident. For Sydney, Brisbane, Adelaide and Perth, median house prices have continued to rise. For Sydney and Brisbane there was a decline in median values, or at least a flattening of growth, for p2023, but this has to some extent reversed for p2024. Both Adelaide and Perth show continued growth straight through both p2023 and p2024.

For Melbourne, Canberra, Hobart and Darwin, there was a similar slowdown in p2023, followed by further falls for p2024.

Transfers of established houses

The ABS stats for the number of transfers of established houses (excluding new builds) gives an overview of market activity.

Looking at these charts from the perspective of comparing the number of transfers from p2023 with p2024, the first thing to notice is that with the exception of Darwin and Adelaide, the number of transfers for the most recent March quarter is below the number for March quarter 2023.

Broadening that regard to the entire p2024, Canberra, Brisbane, Hobart, Melbourne and Perth all show at least two quarters in p2024 where transfers were below those for the previous corresponding quarter. On the other hand, Sydney managed to set a seven-year high for transfers in September quarter 2023.

Conclusions

There is variance between the different geographical markets - as you would expect. Overall though, the alarming trend is that, despite the additional increase of 0.25% as recently as November 2023, higher interest rates, comparing p2023 with p2024, have become "normalised" in the markets.

To give some idea of just how "out of kilter" things are, we can look to a speech by the RBA's Jonathan Kearns, head of domestic markets, entitled "Interest Rates and the Property Market", which he delivered in September 2022. He stated:

In the April [2022] FSR [Financial Stability Report] we used a user-cost model to estimate that a 200 basis point [2.0%] increase in interest rates - which increases mortgage payments and so the cost of owning - would lower real housing prices by around 15% over a two-year period. While this 15% decline was commonly reported as being a forecast for housing prices, it was not actually a prediction of how much housing prices would change. Rather it was an estimate of how sensitive housing prices are to interest rates , assuming that all the other costs and benefits to housing don't change with interest rates.

Between April 2022 and September 2022 interest rates increased by 2.25% with little real discernible medium-term effect on house price growth in markets such as Sydney through to 2024. The reason for this likely rests with that last phrase by Mr Kearns, the caveat "assuming that all the other costs and benefits to housing don't change with interest rates".

As mentioned above, one factor that continues to dominate the housing market is the aftershock of COVID. Added to a period of very low interest rates, against a background of three decades of poor management of housing in most states, you end up with a housing market that is somewhat out of control.

The renovation market

How has all this played out in Australia's renovation market? As HNN has discussed in the past, measuring alt-adds is something of a difficult task. In this case, we're looking at three sets of ABS stats. The first and simplest is the stats from ABS building approvals, the original monthly data that relates to approvals granted through to May 2024.

The second set of stats is from the same basic series, but instead of original data, it is quarterly data for chain volumes. Chain volumes adjust for price differences (brought about by inflation and other causes). Chain volumes thus tend to provide a more "pure" reflection of demand.

The third is derived from the National Accounts stats relating to final state/territory demand. For those stats we're also using chain volumes.

NSW

While these charts tend to look both dynamic and confusing, in the end this chart shows that the value of alt-add approvals for NSW has been relatively stable over the past three periods. There was a decline of just 0.3% for p2024 over p2023, and an increase of just 1.6% for p2023 over p2022.

That said, the manner in which that value is delivered is radically different, with the noticeable spike in December 2021 probably a consequence of influences related to COVID lockdowns.

Equally, the activity for April and May 2024 (not covered by the other quarterly stats) is interesting as it suggests an increase in these approvals.

Dealing with much of the same data (excepting April and May 2024), this shows a quite different outlook, with the value for approvals in p2024 falling somewhat below those for p2023, and p2023 very much below p2022.

This shows roughly the same situation as the previous chart, though the increase from p2022 to p2023 is moderated, and the decrease from p2023 to p2024 is much larger.

As the Sydney market has shown ongoing increases in house values, this supports the legacy forecast that an active house market will see a decline in spending on alt-adds activities.

VIC

Again, while this chart looks slightly chaotic, p2024 is only 1.3% above p2023, and p2023 has lost just 1.0% on p2022.

This shows the extent of the actual decline in alt-adds from the highs of p2022, though there is an uptick for p2024 for March quarter 2024.

Looked at through the lens of national accounts, there is far more synchronicity between p2022, p2024 and p2024. The decline for p2024 is also more marked, especially for December quarter 2023.

Here we see something of a contradiction to the legacy analysis of countervailing markets for houses and alt-adds. Even as the housing market declines, so too does the alt-adds market.

QLD

The original data for QLD shows that new highs were achieved in six of the 12 months of p2024. That's despite the fact that median house values continued to increase. Overall, approvals for p2024 were 8.0% up on those for p2023, while p2023 were up 1.3% on p2022.

In this case the chain volume measurements reflect the original data, with p2024 following a similar pattern to p2023, but at a higher value level.

There are broad similarities with the previous chart, but with an interesting lift for activity in the December quarter.

Again, this broadly supports the legacy view regarding countervailing markets.

SA

It seems evident looking at this chart for SA that p2024 was a year of high growth for alt-adds. Seven months show new highs, and one month matches the previous high. In fact, overall p2024 grew by 12.8% over p2023, while p2023 grew by 4.1% over p2022.

In this case, the chart for chain volumes casts the previous chart's data in a new light. Overall for p2024 there was a 2.0% decline over p2023.

This chart essentially corroborates the previous chart, cancelling out the lift for December quarter 2024

Given the ongoing strength in the SA housing market, this again supports the legacy view that housing and alt-adds markets are countervailing.

WA

As this chart clearly indicates, alt-adds have grown significantly in WA. For p2024 the state grew by 31.4% over p2023.

That picture of growth is moderated using chain volume measures, but it still remains significant, with p2024 growing by 17.4% over p2023.

National accounts using chain volume measures moderates this increase slightly, but still shows a breakaway December quarter 2024.

WA represents a different departure from the legacy view. The house market is flourishing, but so is the alt-adds market.

TAS

This shows a general increase for alt-adds in p2024 of 8.0%.

This chart largely accords with the previous chart. Adjusted for chain volume, the increase in alt-adds for p2024 over p2023 remains around 8.0%.

Again, this chart broadly reflects the two previous.

The data for TAS broadly supports the legacy view. With a declining house market, alt-adds spending has increased.

NT

The sharp rise in October 2023 all but guarantees alt-adds for p2024 are above those for p2023. In this volatile market the increase for the 12 months is 27.9%.

The chain volume measure is more clear, indicating p2024 outperformed p2023 outside of the December quarter.

The national accounts do show a more mixed picture, with p2024 underperforming p2023.

Darwin and the NT are difficult markets to understand. Both the performance of the overall housing market itself and alt-adds are somewhat mixed.

ACT

With alt-adds building approvals touching on seven year lows for seven of the 12 months, it's clear that this sector is performing below p2023 during p2024.

This chart largely supports the conclusion above, but with unexpected strength in December quarter 2023.

This chart draws a very clear picture for underperformance for p2024 as compared to p2023.

With the ACT housing market in decline, this goes against the legacy view of how that market relates to alt-adds. However, as with NT, this is a highly volatile market.

Analysis

What these stats for alt-adds demonstrate is that this area is somewhat complex to understand and forecast at this point. It is certainly the case that the pattern which has dominated much the 2000s and the 2010s - of dwelling investment shifting between house building and renovations depending on market conditions - still has a major effect on the market.

However, it's also true that a range of other forces are likely at work as well, as in demonstrated by both VIC and WA, as well as the ACT. HNN would speculate that in some markets, expenditure on alt-adds has increased due to the ongoing surge in the housing market. At some point, the price of new houses becomes simply inefficient, and homeowners realise they can obtain the features of a new house on their existing property at a lower cost through alterations and additions.

Similarly, given high average house prices and increasing cost of living pressures, alt-adds have become the best coping mechanism for many homeowners. Economic uncertainty has enhanced the value of taking a more conservative approach.

All this means that alongside the behaviour in some markets of switching between the housing and alt-adds markets based on current prospects, there is an additional behaviour where when the housing market surges, the alt-adds market does as well - though to a lesser extent.

The local community in Wagga Wagga (NSW) continues to wait for new plans for Bunnings' relocation to one of the city's busiest intersections, according to a report in The Daily Advertiser.

In late 2023, plans were rejected by Wagga councillors for Bunnings' proposed move to 64 Pearson Street.

Car Wash owner Steve Kenyon - whose business is located on Person Street - said he has been talking directly with Bunnings over recent months, and there have been meetings with various stakeholders. Mr Kenyon is waiting for Bunnings to come back with a new plan that no longer include a traffic light outside his location's driveway. He said:

We have no objection to Bunnings going there, but we just want to make sure that the traffic movement doesn't affect the businesses on Pearson Street. The ball is in Bunnings' court as to going with a few of our wishes and changing their application.

The $25 million move that was initially approved with conditions by Wagga City Council in 2021. The rejected plans by Bunnings included traffic lights, a median strip, a Pearson Street exit and reduced on-street parking.

However discussions are continuing between Bunnings, council and regional transport and roads minister Jenny Aitchison, according to Wagga City Council general manager Peter Thompson. He told The Daily Advertiser:

While there has been some progress in relation to the issue, the concepts under discussion still present challenges. Discussions will be ongoing between all parties, including the community representatives and the businesses in the area.

Related

Greenlife suppliers

The federal government recently announced it would adopt every recommendation from the independent review of the Food and Grocery Code of Conduct led by economist and former Labor trade minister Dr Craig Emerson.

However, plant growers were disappointed the review decided Bunnings should not fall under the code alongside other big retailers such as Woolworths and Coles.

Greenlife Industry Australia (GIA) CEO Joanna Cave told The New Daily while she was pleased the code would be strengthened, the decision to leave Bunnings out was "deeply disappointing". She said:

The issue's acknowledged, but greenlife growers are left out in the cold. They're effectively the only growers within the whole of the horticultural sector that don't benefit from a code of practice protection, which is why we were asking for them to be included in the first place.

The review has recommended Bunnings work with GIA to develop a document setting out expectations about the supply of nursery plants, and progress of the relationship could be reviewed in two years' time.

The government's response to the review also outlined concerns about allegations of retailer conduct towards nursery plant suppliers, and said it would "continue to monitor conduct in the nursery plants industry".

Ms Cave said GIA would approach negotiations with an open mind, and she hoped Bunnings would do the same. She said Bunnings had placed some rebates under review, including one in which the volume of plants it bought had a direct effect on the discount growers were obliged to give it.

They've been very careful to say that any measures are likely to be temporary. We're interested to see what sticks now that the government has made its position clear that they won't be admitted to the Food and Grocery Code.

Will Bunnings breathe a sigh of relief and go back to business as usual? Or have they learned their lesson and are they willing to make some changes for the benefit of the greenlife growers?

In a statement to The New Daily, Bunnings managing director Mike Schneider said the company welcomed the recommendation that retailers outside the supermarket and grocery industry are not be taken into the code.

We note the report's suggestion that we work collaboratively to set out expectations relating to the supply of nursery plants, and we look forward to continuing to engage with suppliers and relevant industry associations.

We recognise that good supplier relationships are essential for the continued success of our business.

New code mooted

Ms Cave said GIA had been approached by the Department of Agriculture, Fisheries and Forestry to discuss potential nursery code of conduct. It is likely it would emulate the food and grocery code, but be more specifically tailored to the needs of greenlife growers.

Ms Cave said one of the areas in most need of attention included stronger commitments between the retailer and greenlife growers. A common complaint from growers is that Bunnings would not commit to buying specific volumes of plants, leaving many out of pocket.

A nursery code of conduct would also need to include an anonymous complaints mechanism, similar to the one that will become part of the food and grocery code, thanks to the review's recommendations.

In the current situation, Ms Cave said growers had little to no avenues for recourse when facing problems.

Bunnings does operate a complaints procedure of its own. But you can understand why growers would feel very reluctant to use a complaints procedure managed, funded and organised by the very organisation it wants to complain about.

And [regarding] the [Australian Competition and Consumer Commission], for example, the burden of proof is on the growers. It's very hard to successfully make a claim through that avenue. It takes a long time, costs money.

That's why we've been lobbying for a code that contains within it decent dispute-resolution mechanisms, because without that the growers really have no way of raising concerns.

Related

A Sydney Tools outlet has opened next to Wodonga Homemaker Centre in Victoria. Store manager Jerico Johns said there has already been a positive reaction to the "one stop shop".

A rival Total Tools store is being built less than one kilometre away adjacent to Bunnings, but Mr Johns is not concerned. He told The Border Mail:

One hundred per cent we will beat anyone's price. But we shouldn't really have to, we have the market covered.

He said customers, particularly tradies, are enjoying the range of "exclusive products".

Albury-based customer Kurt Jensen was searching for a nearby Sydney Tools and was excited to see one had opened in Wodonga. He said he saved "a few hundred dollars" by shopping at the store.

It's good to have a bit more competition. A bit more range, variety is always great.

Local resident Eckhard Greiner said the store looked good but "just like anything, it will be interesting to see how long they last". He said there seemed to be enough tool stores on the Border but he did walk away with a purchase of drill bits.

Sydney Tools has more than 90 retail stores across the country including one in Wagga (NSW), just over 134kms away.

Another customer Jason Toogood had previously shopped at the Wagga store and said it was great to see they were now on the Border as well. He said:

Competition is what we need.

A grand opening for the Wodonga store is tentatively scheduled for July 18, according to The Border Mail.

Reece

Plumbing supplies group Reece has opened one of its largest multisite locations with four different branches - Plumbing, HVAC, Fire, Irrigation and Pool - in Berrimah (NT), close to its previous premises, at 47 Pruen Road. It will be the first time Reece's Fire and Irrigation and Pool have been available in the Territory.

Reece general manager Ben Counsel said Territorians had previously been serviced by individual outlets.

Prior to the opening of Berrimah, Reece primarily served the Northern Territory through our network of eight plumbing branches across the Territory.

The investment to expand Reece Fire and Reece Irrigation and Pools into the Territory represents our commitment to continue investing in and supporting allied industries that maintain and support the development of essential infrastructure in the Northern Territory.

Centrally located, the new multi-site is designed to provide Territory customers more access to a wide variety of quality products, convenient delivery to site, and a dedicated team of experts across different industries.

Tradelink

Sydney-based private equity firm Allegro Funds is believed to be in a strong position to buy Fletcher Building-owned Tradelink, according to a report in The Australian. This comes after an earlier report that Los Angeles-based Pacific Avenue Capital Partners submitted a non-binding indicative bid in The Australian Financial Review (AFR).

It is now understood that Pacific Avenue Capital Partners has fallen away from the sale process. Also no longer believed to be bidding is turnaround specialists Anchorage Capital Partners.

Sources told the AFR that offers for the underperforming plumbing and bathroom supplies division have come in between $150 million and $175 million.

Fletcher Building is due to release its full-year results on August 21. Sources say binding offers for Tradelink are due to be collected at the end of July, with a signed deal expected to be signed in the first half of August.

Tradelink was placed up for sale by Fletcher Building after the company started wrestling with large debt levels of about $2 billion against a $2 billion market value and lower earnings as recessionary conditions in New Zealand and a weaker trading environment in Australia affected its bottom line.

Any buyer for Tradelink would want to know the extent of liabilities connected to the company's leaky Iplex pipes in Western Australia, as Fletcher Building negotiates a settlement over liability. WA builder BGC has blamed the pipes for the leaks, but Fletcher Building claims the problem rests with the installation.

Related

Big River Industries recently announced the acquisition of Specialised Laminators (SLQ), a Queensland-based panel products company. The move enhances Big River's panel product offerings and adds to its presence in the industry.

Established in 1977, SLQ has earned a reputation for producing high-quality decorative and functional panel products. Now it is part Big River's Timberwood Panels division across Australia. John Lorente, CEO of Big River Group, said:

Bringing SLQ into the Big River family is a significant milestone in our mission to offer top-quality panel products to our customers. This acquisition allows us to expand our specialised panels division, providing customers with a broader selection of innovative and high-performance panel solutions. The synergies between SLQ and Big River create exciting opportunities for growth and product development.

John Closter, one of SLQ's founders and general manager Wayne Austin, will continue to lead the business under the Big River umbrella, ensuring continuity and leveraging their expertise to drive future success. Mr Closter said:

Joining Big River Group is an exciting new chapter for SLQ. We are confident that our combined expertise and resources promise enhanced product availability, improved supply chain efficiencies, and innovative panel solutions tailored to meet diverse construction needs.

Big River has been operating for over 120 years, manufacturing and distributing timber and steel formwork products, timber flooring, building products, structural plywood and related timber products. It also distributes MaxiWall and MaxiFloor, primarily to the commercial, residential and infrastructure construction market segments.

Related

Fletcher Building and BGC

Fletcher Building has accused BGC of a "crude attempt" to pressure negotiations to resolve the bursting water pipes crisis in Perth (WA).

As the manufacturer of the controversial Iplex piping, Fletcher Building released a statement to the stock market rejecting BGC's claims the rate of pipe bursts was getting worse. It said:

The public claims made by BGC are a crude and apparent attempt to place pressure on those negotiations. The conclusions shared by BGC have not been verified, shared with Iplex and are, in many respects, inconsistent with evidence we have gathered first-hand or been provided by other parties.

The West Australian revealed BGC's claims, which included that bursts were over 20% higher than the same period (June) last year.

BGC is the largest builder to use the "defective" Iplex piping, accounting for about 65% of installations in new homes. It claims the pipes were faulty and has blamed the manufacturer, which in turn denies the claims and says incorrect installation is the cause of all the leaks.

In its statement, Fletcher Building said it hadn't changed its view.

Fletcher Building stands by its views on causation shared with the market previously.

Both companies are participating in mediation organised by the WA State government to find a way out of the impasse, with affected homeowners calling for their houses to be re-piped. The dispute is over who will wear the steep cost.

As revealed by The West Australian, the State Government has put $30 million into a fund, that has so far accumulated $130 million to $150 million to remediate homes. BGC had earlier walked out of negotiations, but was persuaded to return.

In its statement, Fletcher Building said it remained "committed to a sensible, data-led and proportional solution from all parties and to playing its part in that process".

We continue to participate in mediated discussions alongside the WA Government and many WA builders, including BGC, to finalise an industry response to the plumbing failures occurring in Perth. These negotiations are confidential and have not yet concluded.

On average it cost AUD80,000 (NZD86,000) to do a full pipe repair in BGC homes, and it was a pipe manufacturing problem, according to BGC's general manager of strategy and commercial Sam Gray.

However some estimations put the cost of replacing all Iplex piping at more than $1 billion.

Related

Sydney-based independent pet retailer PetO has tripled its business and taken on 66 new branches, following Woolworths successful bid to acquire 55% of pet goods business PETstock.

The deal was scrutinised by the Australian Competition and Consumer Commission (ACCC) and ultimately gained approval in January 2024 after PETstock offered to divest 41 stores and 25 vet clinics. All of these have now been bought by PetO, a network of 17 stores that began in Sydney's northern beaches, for an undisclosed sum.

With PetO's acquisition, its revenue triples to about $200 million and its store footprint expands out of NSW to Victoria, Queensland, Western Australia, Tasmania and the ACT.

At the time of the acquisition, PetO co-founders and brothers Nick Greenhalgh and David Rowe had not decided whether to rebrand all the stores to PetO or retain some existing brands. In WAToday, Mr Greenhalgh said:

We've just got to evaluate the brand equity and how it resonates with the customer. We really want to go through that process first just to see what it tells us, and it will give us some clarity once we've done that.

PetO's core range will be introduced to the newly acquired stores, while retaining well-performing product lines that are popular among certain locations or demographics. Mr Greenhalgh said:

We're really quite comfortable and confident we'll get to the point where we're crystal clear about what's ahead of us in phase one, which is about stabilising the business. Phase two will be to harmonise the business. The third phase, or the third horizon, is to launch our road to even more growth.

Mr Greenhalgh, whose role focuses more on people and operations while Mr Rowe oversees store rollouts, product, finance and forecasting, said the acquisition had removed a lot of uncertainty for store staff who had already seen at least one ownership change less than two years ago when acquired by PETstock.

They've gone through quite a lot of turmoil and in a relatively short period of time ... People want a sense of belonging, they want to be supported.

Although the ink has barely dried on the paperwork on the acquisition, the co-founders are already looking at future expansion to be a "credible third player" to compete against Petbarn and PETstock. Mr Greenhalgh said:

If we can put another 100 stores on it from 60, let's say to 160, we still wouldn't be the equivalent of number two. So there's a lot of runway.

PETstock, Australia's second-largest pet retailer with more than 200 stores, was also founded by two brothers, Shane and David Young, from Ballarat. The $10 billion pet sector is led by Petbarn (owned by TPG's Greencross).

The sector is considered a crowded space after a COVID-19 puppy boom. Not only has Woolworths entered the sector, Wesfarmers' Kmart also sells a huge amount of pet products, and Bunnings has expanded significantly into food and accessories for cats, dogs and birds. They compete with e-commerce players such as Pet Circle, owned by TDM Growth Partners.

Mr Greenhalgh acknowledged the tighter market conditions, but said it was immaterial in pet supply given PetO sells essentials, "and people do not cut back on kids and pets". PetO offers two-hour deliveries and 30-minute click-and-collect as well as dog washing and harness fittings in store.

Mr Greenhalgh said the expansion came at the perfect time for PetO. In The Australian, he said:

Australia is right now experiencing record levels of pet ownership and increased demand for pet products. We couldn't think of a more exciting time to be expanding across the country.

At PetO, we think of ourselves as the cat and dog specialists. We know your furry friend is more than just a pet, they're a member of your family - that's why our business is centred around exceptional customer experience and expert advice.

Related

Home improvement retailer Lowe's has piloted an Apple Vision Pro-powered kitchen design experience at three locations across the US.

The Lowe's Style Studio app enables viewers to explore kitchen projects with Apple's new mixed-reality headset and design a kitchen while immersed in a virtual 3D environment.

During the free, 45-minute one-on-one appointment with a Lowe's kitchen specialist, customers are set up with an Apple Vision Pro headset so they can personalise their kitchen using Lowe's Style Studio.

Users can explore preset styles curated by Lowe's professional designers as well as customise hundreds of real-world materials, fixtures and appliances all available at Lowes.com or in store.

Then, customers can save their selections or share them with friends, designers and contractors (tradies). They can additionally shop the products they selected to build their real-world kitchen.

Lowe's executive vice president - chief digital and information officer, Seemantini Godbole said:

We believe Apple Vision Pro can enhance in-store kitchen design experiences, empowering our customers to visualise their dream kitchens using advanced spatial computing technology.

Following the pilot program, the Lowe's Style Studio app will still be available for free for Apple Vision Pro.

Home Depot

Home Depot's delivery partnership with Instacart is being made available at 2,000 of the company's stores. In a statement, Jordan Broggi, president of Home Depot's online division, said the aim is to give customers "a seamless interconnected experience".

We're increasing flexibility for our customers ... no matter how they choose to shop.

The deal allows an Instacart customer to order items of modest size that Home Depot sells, "from garden essentials and building supplies to light fixtures" but also to use a special Instacart service that specialises in items up to 60 pounds (27.2kgs), such as BBQs, ladders and large boxes, said a Home Depot spokesman.

Customers who have "Instacart+" memberships will have free delivery. Others will pay a delivery fee.

The partnership, one of many Home Depot has with companies that provide deliveries, was finalised after the companies ran pilot projects of the arrangement, the spokesman said. He said the trial programs were conducted for several months in three markets, but declined to say which ones.

Online transactions accounted for 14.8% of Home Depot's business last year, about USD22.6 billion, the company said.

Related

The Australian Bureau of Statistics (ABS) has released its Producer Price Indexes through to March quarter 2024. The charts in this series are taken from statistics for "Input to the House construction industry, six state capital cities".

As the main chart above shows, the general trend has been for housing construction inputs to begin a steep rise in June quarter 2021, which continued to around December quarter 2022, and then have increased at a slower rate.

Timber categories

The chart for the timber categories, as a weighted average of the six state capitals, shows three trends: the standard trend described above, an extreme increase that has been maintained, and a sharp increase that has trended down since December quarter 2022.

Timber windows follow the extreme trend, with an extreme rise that has not declined, while structural timber rose to a high index, before continuing to decline through to March quarter 2024.

Tile and brick categories

The chart for the tile and brick categories, as a weighted average of the six state capitals, shows a range of trends. Ceramic tiles, it turns out, saw milder price rises than other categories, and a decline during both September and December quarters of 2024, before rising again in 2024.

Terracotta tiles were relatively stable through to September quarter 2021, then rose sharply in price through to December quarter 2022. The other three categories began a more gradual price increase in June quarter 2021, and have continued to increase in price since then.

Building materials categories

The chart for building material categories, as a weighted average of the six state capitals, shows three unique trends.

Sand has seen the steepest rise, cement a more moderate increase, and ready-mixed concrete a more subdued lift. The increases came later than in other categories, beginning around June quarter 2022.

General materials categories

The chart for general materials, as a weighted average of the six state capitals, shows a constant, continued increase in price indexes September quarter 2021 onwards.

Plumbing materials categories

The chart for plumbing materials, as a weighted average of the six state capitals, shows three sets of trends.

Sheet metal sanitaryware shows the sharpest increase, which began in September quarter 2022. Taps and valves, as well as copper pipes and fittings, shows the least rise in price index. Plastic pipe and fittings remains relatively subdued until March quarter 2022. The rest follow a relatively slow and gradual increase in price indexes.

Metal materials categories

The chart for metal materials, as a weighted average of the six state capitals, shows a basic trend, with two exceptions.

The general trend sees the upswing in the price index start in September quarter 2021 and continue through to March quarter 2023 before flattening out. The two exceptions are steel beams and sections, as well as metal garage doors.

The former starts to rise steeply in June quarter 2021, hist a peak in September quarter 2022, then declines through to December quarter 2023, and is almost flat for March 2024.

The latter rises very steeply in June quarter 2022 through to September quarter 2022, then rises more gradually through to December quarter 2023, before flattening into March quarter 2024.

Electrical materials categories

The chart for electrical materials, as a weighted average of the six state capitals, shows some distinct trends.

While switches and distribution boards, as well as the "other" category, have been relatively stable after a price index bump in June quarter 2020, electrical cable and conduit also rose in June quarter 2020, then started a very steep climb in June quarter 2021 through to June quarter 2023.

Analysis

The good news here is in structural timber and steel beams and sections, both vital categories for dwelling construction, which came down in price through calendar 2023. However, other construction input prices have remained stubbornly high. Some, like metal garage doors, and speciality items, but others, such as timber windows, are common to most construction jobs.

Bunnings recently made an internal announcement regarding changes to its executive team that led to the departure of its chief commercial officer Ben McIntosh, chief transformation officer Leah Balter, and general manager of corporate affairs Maria McCarthy. It was first reported by the Australian Financial Review (AFR).

Other changes include chief customer officer Ryan Baker being appointed as chief operating officer, while current chief financial officer Rachael McVitty will become chief customer officer. Michael Howard, currently at Wesfarmers, has been appointed chief financial officer from July 1.

Director of merchandiser Jen Tucker has also decided to leave the business following a family bereavement. Managing director Mike Schneider told the AFR:

I would have said it's a reshaping, rather than a restructure ... This is not a cost thing.

Mr Schneider said the reshuffle was designed to bring the commercial and customer teams closer together, and the cost savings would be minimal.

We want to stay laser-focused on customers.

Mr Schneider also dismissed any connection the "restructure" was part of a succession plan that involved his potential departure. In the AFR, he said:

I've got really, really strong plans. I'm a Bunnings lifer through and through.

The changes come in the wake of what many have seen as an underperforming first half for Bunnings in FY2024. Revenue grew by just 1.7% over the previous corresponding period (pcp), which was FY2023 H1. Store-on-store revenue increased by 1.2%, versus 2.8% in the pcp, while total store sales growth came in at 1.9%, versus 5.1% in the pcp.

This comes as its fellow Wesfarmers retailer, Kmart Group, increased earnings before taxes from $475 million in the pcp to $601 million for FY2024 H1.

As Mr Schneider has pointed out, the Bunnings model has now been in operation for 30 years. Many of the challenges the hardware retailer faces actually originate in its outstanding success over the decades.

As Wesfarmers managing director, Rob Scott, pointed out in his opening remarks for the conglomerate's Strategy Day in early May, the market retailers operate in is now splitting between cashed-up baby boomer and Gen X retirees, and the ever-growing base of Gen Y and Gen X, who are struggling in a tough economy.

The challenge for Bunnings is how to keep the "rusted on" deep fans of Bunnings from older generations happy, while reaching out to the new market represented by younger generations. This is likely one of the reasons for Bunnings' expansion into the pet category - aside from the very good margins - as pets reach across generations.

Much of Kmart's success has been put down to its successful Anko home brand, which has managed to have that broad appeal across generations, offering a value/price combination that has proved popular. In contrast, it's clear that the basic Bunnings store concept may be in need of revitalisation. It has also not succeeded in better integrating newer categories, such as Smart Home, into its overall offerings.

That said, the company has managed to improve its very popular website in ways that bring it into best practice for online retailers. It is also reaching out into new forms of advertising and marketing, including a TikTok campaign aimed to better acquainting tradies with financial complexities such as depreciation.

Bunnings employs more than 55,000 people across its stores.

Supermarket prices review

Bunnings has argued its sales of flowers and plants, and some grocery items don't warrant classifying it as a supermarket retailer following the final report released by the Greens-led Senate Select Committee on Supermarket Prices Inquiry.

The report also suggested that the Food and Grocery Code, which is currently voluntary, should be made mandatory and expanded to include greenlife industries and all retailers stocking food and groceries. Both suggestions would bring in Bunnings, given its large greenlife offer and its recent push into home cleaning products such as dishwasher tablets.

However, Bunnings managing director Mike Schneider said there could be unintended consequences of including it with the supermarkets and placing it under the Code. He told The Australian:

We note the recommendations in the select committee's final report but maintain our view that as the Food and Grocery Code was tailored for the supermarket and grocery industry by Coles, Woolworths and the Australian Food and Grocery Council, it should not be extended to retailers in other industries.

We agree with Dr Emerson's comments in the Food and Grocery Code of Conduct interim review report, that there could be unintended consequences. We operate in the home improvement, building materials and lifestyle product sectors, which have fundamentally different characteristics to the supermarket and grocery sector.

Although Bunnings was outside the terms of reference when it was invited to contribute by the Senate committee towards the end of its process, the hardware retailer fully engaged. It made two written submissions to respond to the evidence from Greenlife Industry Australia (GIA) and aggrieved greenlife growers. Mr Schneider said:

We appeared at the hearing, responded to questions on notice and invited the committee to ask further questions if it wanted more information.

But the final report noted that Mr Schneider did not personally appear before the inquiry:

The committee was disappointed that the Bunnings chief executive officer did not appear personally to give evidence.

In response to some of the claims made by nursery owners, plant growers and greenlife industry body GIA at the Senate inquiry, Mr Schneider said he had written to all of Bunnings suppliers to get their feedback.

We highly value our suppliers and work hard to build enduring relationships. On hearing GIA's concerns, I wrote to each of our greenlife growers inviting their feedback as we know we can always learn and improve.

We have engaged with many of them through the forums we run annually across the country and spoken with a number of industry associations. It's been heartening to receive positive and helpful feedback. I'm proud of the relationships we've built with our greenlife suppliers and over half of them have been with us for more than 20 years, which demonstrates the strength of our commitment to achieving shared success.

GIA chief executive Joanna Cave applauded the recommendation that "growers be protected from unfair trading practices via Bunnings' inclusion", saying it brought them a step closer to "a decent and equitable trading relationship" with Bunnings.

The Senate Select Committee on Supermarket Prices Inquiry report made 14-recommendations designed to tackle the price of food and reign in the power of Coles and Woolworths through increased competition, new legislation and strengthened regulations.

Dr Craig Emerson is due to present his review of the Code by June 30. An ACCC Supermarkets Inquiry is also expected to table an interim report no later than August 31 with a final report due next February.

Related

Milton Vadoulis, owner of Vadoulis Garden Centre, recently announced on social media that his Gawler-based garden centre in South Australia is shutting down for good. In the Messenger-Eastern Courier, he said:

After 64 years, three generations and two sites, it is with a heavy heart and mixed emotions that I have to announce the closure of our Gawler operation.

I'd like to thank you, all our beautiful loyal customers, our fantastic staff and wonderful suppliers for a great journey and wonderful memories.

For me personally, after running the business for 47 years, it is time to hang up my secateurs.

Vadoulis Garden Centre has been in operation since 1960 and a fixture in the local community since 1969 after growing too large for its original Barossa location. The 4000sqm site is stocked with a range of plants, outdoor furniture, giftware, books and jewellery and has been staffed by a team of 15 full-time and casual workers.

The social media post received hundreds of likes since it went live, with customers and other businesses offering words of support and sharing their sadness at the community's loss. Amanda from Barrow and Bench Mitre 10 wrote:

You should be proud of the welcoming garden retail experience you created over many years Milton.

McCourts Garden Centre described Mr Vadoulis as "a leading light in our industry and inspired and mentored our business from when we started 26 years ago".

Mr Vadoulis is regarded as Gawler's unofficial mayor and said "red tape" behind the scenes of the business was becoming impossible to keep up with. He told the Messenger-Eastern Courier:

It's very difficult to run a business currently ... all businesses like myself, small businesses, not garden centres, we're always saying 'the red tape is killing us'. Everyone says, 'yeah, yeah, yeah' but then they keep putting more and more on us, it's just the reality.

It's just too hard, I think that we will be lucky to have a small business around in five years, because they're just putting too much compliance and red tape in front of us all the time.

Mr Vadoulis didn't dispute that rules relating to health and safety were important but said the vast difference between large businesses and small ones made it hard to cope. He said:

If you're a big multinational, you've got a department that can handle that, but you know, a small-business person is sitting around a kitchen table trying to sort all these papers.

Mr Vadoulis said many of his friends in business were experiencing the same difficulties, with some already closing and others considering the "emotional" choice.

I think in the next year, maybe even 18 months there is going to be a lot go through (closure), and there is many reasons for that, but the main one - it's just too hard. And it's a shame ... I mean we have been here 64 years, we're in the third generation.

Choosing to close affects owners, staff who lose their jobs as well as loyal customers. Mr Vadoulis said:

I've had customers coming in [since the announcement] and hugging me and crying every couple of minutes, saying 'Where am I going to go now?'

When I closed up last night, I walked through and shed a tear because it's what you've worked your whole life for - and it's disappearing before your eyes. Unfortunately, I doubt very much that another garden centre would take over from us in Gawler, who knows, but in my experience it won't happen.

The centre is running a closing-down sale and offering product discounts, while the cafe will continue to operate as usual until June 30.

Tradelink

It is understood information memorandums have been sent out by Miles Advisory which has been hired to sell the Tradelink business by New Zealand-based owner Fletcher Building, according to a report in The Australian.

Tradelink has over 100 showrooms and more than 230 branches across the country, supplying products such as vanities, bathrooms, toilets fixtures and fittings for bathrooms, kitchen and laundries.

It is valued at about NZD150 million, but some in the market say it could possibly sell for more, with such businesses selling for seven to eight times their annual earnings before interest and tax. Yet NZD122 million was wiped off its carrying value in February this year.

One prospect which could be pitched to prospective buyers is the opportunity to gain a distribution network where sites could be repurposed.

The view is that Metcash will take a look, with the business potentially a good fit with its hardware division including Total Tools and Mitre 10 stores. It is understood industry groups Reece and GWA have already passed on the Tradelink opportunity. But it is believed both trade groups and private equity firms have already expressed interest.

Related

Tilling Timber Townsville territory manager Rita Fisher said Townsville and Newcastle had been selected as the first locations for an ambitious regional expansion by the company.

A long-term lease was signed for the former Bunnings Trade Centre warehouse at 8-16 Jay Street, Bohle in the northern part of Townsville. It opened in the new location just before Easter and recently held its official opening. Ms Fisher told the Townsville Bulletin:

They've identified Townsville as an area that's going to grow quickly once building starts picking up again.

We're really supporting the timber retailers ... [like] Cleveland Trade Centre, Parkside Timber and Hardware Parks, Big Hammer Building Supplies, and the Bunnings network ... It's probably more for builders and homeowners looking for a lightweight, renewable and energy efficient option instead of concrete for their subfloors.

According to its website, the Tilling Group is Australia's largest wholesaler of engineered wood products including the SmartFrame range of timber I-Joist, laminated veneer lumber and glued laminate beams. Ms Fisher said Brisbane had previously been the nearest distributor for engineered wood products.

[Townsville's] an area that's very under serviced by the industry at large. [If] something went wrong on a building site, it would take weeks to fix it, whereas now we can get someone sorted out within a couple of hours.

It's about servicing the industry, making sure that when work picks up, we're ready and we're organised, fully stocked so that builders can worry a little bit less about lead times and running out of materials like they were dealing with after COVID.

Ms Fisher also said there were "great signs of life" that building was starting to pick up in the region, with confidence growing and "a lot of high-end construction underway".

Once interest rates level out, I think Townsville will kick on really quickly and we'll start seeing a lot more building happening.

Established as a small factory in Eltham (VIC) by Norm and Judy Tilling in 1963, the business initially set up in Townsville in the late 1980s, where they imported solid timber products like Douglas fir from the US. They made the decision to relocate its business to Melbourne and shift focus on engineered wood products.

Today, the company is under the management of the Tillings' son Glenn.

Home Depot posted a bigger-than-expected drop in quarterly same-store sales as cautious US consumers spent less on big-ticket items while focusing on small-scale home repair and maintenance tasks.

Customers have cut discretionary spending and put expensive, large-scale renovations on hold as they adjust to higher borrowing costs and elevated inflation.

As interest rates remain high, consumers have been reluctant to move out of their homes and into new ones - the kind of turnover that often inspires home improvement projects.

In the fiscal first quarter that ended April 28, customers made fewer visits to Home Depot's stores and website and tended to spend less when they did. Customer transactions declined 1% to USD386.8 million and average ticket fell 1.3% to USD90.68.

Comparable sales of items priced higher than USD1,000 were down 6.5% in the quarter.

Inflation may also be playing a role in that pullback, as consumers spend more money on essentials and have to make trade-offs when spending discretionary income.

Home Depot reported revenues of USD36.4 billion for the first quarter of its fiscal year, down 2.3% from the same period a year earlier. It had net earnings of USD3.6 billion during the three months, roughly 7.7% below a year ago.

However, chief financial officer Richard McPhail said Home Depot is not seeing customers trade down to cheaper items, like less expensive power tools or appliances. He reasoned that the company's softer sales in large part on consumers' "deferral mindset" and a housing market that has slowed dramatically. He told CNBC:

When we have seen mortgage rates decrease slightly, as we saw at the beginning of this quarter, the housing turnover seems to respond quickly and sharply in a positive direction.

And so we think that's an indicator that there is a tremendous amount of pent-up demand for household formation and housing turnover and the larger projects that are associated with housing turnover.

Weather pressured sales, too, in the recent quarter, he said. Spring is the biggest sales season for home improvement retailers. Yet customers delayed outdoor purchases because of colder and wetter weather in many parts of the country. Those spring purchases have begun to pick up as the weather improves, he said.

To overcome slower sales, the home improvement retailer has revved up its strategy to attract professionals, since they tend to buy larger quantities and offer a steadier source of sales.

Home Depot has a growing network of distribution centres across the US that can store and deliver roofing shingles, insulation and other supplies straight to job sites.

It also announced in late March that it would acquire SRS Distribution, a Texas-based specialty distributor of roofing, landscaping and pool supplies, for USD18.25 billion in the largest acquisition in the company's history. Mr McPhail said the deal is still on track to close this fiscal year, which ends in early February 2025.

Along with targeting professionals, Home Depot is trying to drive growth by opening about a dozen new stores this year and adding features to improve its online and in-store experience.

Mr McPhail also said Home Depot stores are fully staffed and have the best in-stock levels they have had in years. Transportation costs have fallen. While organised retail crime remains a challenge for the industry, he said shrink, a term that refers to items lost, stolen or damaged, declined at Home Depot year over year, too.

Home Depot has also added technology to make sure it has items on shelves when customers need them. For example, it is using computer vision to make sure that products for sale are damage-free and to prevent theft when customers use self-checkout, said Ann-Marie Campbell, senior executive vice president who oversees US stores and operations.

Home Depot has a workforce of about 465,000 operating 2,337 retail stores.

Related

US-based Briggs & Stratton is understood to be exiting the region and placing its Briggs & Stratton Australasia arm for sale. It is the owner of heritage power tool brand Victa, maker of petrol-powered walk-behind mowers, blowers and chainsaws and accounts for 43% of its net sales, based on a report in The Australian Financial Review (AFR).

Any sale will include exclusive distribution rights for other Briggs & Stratton-owned brands such as ride-on mower maker Ferris and specialty turf equipment brand Billy Goat, and the right to distribute third-party brands including Echo, Shindaiwa and Oregon.

Briggs & Stratton's customers include a 1300-strong network of dealers, original equipment manufacturers and retailers such as Bunnings and Mitre 10.

In the sales documents seen by the AFR, details of Briggs & Stratton's top-line financials feature $115 million in net sales forecast for this financial year. But its earnings are in single digits, forecast to hit $7 million this year.

The decision from US headquarters to exit Australia is driven by the company's desire to focus on its core business. In 2023, Briggs & Stratton divested its North American retail-facing business in an attempt to simplify operations.

The Australasian arm comprises a local management team, 100 or so staff, a main distribution facility in Sydney and smaller operations in Melbourne, Auckland and Kuala Lumpur. The company said:

Given the AusAsia business is largely stand-alone and has the capability to continue to distribute Briggs & Stratton brands outside of the group's ownership, the priority is to simplify global operations.

In addition, while trading performance is still rebounding, there is a recognition that the business will also benefit under new ownership with greater levels of support than the current group strategy affords.

Briggs & Stratton hopes to return pre-COVID sales levels and double-digit earnings next financial year. It experienced a significant revenue boost from COVID-19 as cashed-up consumers focused on beautifying their homes. However, softer macroeconomic conditions have impacted the category.

The Australian division acquired the Victa lawnmower brand in June 2008 from ASX-listed GUD Holdings for $23 million.

At the time, then-GUD chief executive Ian Campbell said Chinese small-engine manufacturers with cheaper products had affected Victa. He said the drought meant Victa sales had also declined.

More recently, the sector has been challenged by gardening services such as Jim's Mowing and growth in the number of people living in apartments in Australian cities.