Big box update

Bunnings in Cairns

Stores in South Australia, expanded cleaning products offer, Woolworths' pets acquisition, and property merger

Approval is being sought to expand the Bunnings store in Cairns, Far North Queensland.

A development application (DA) was recently submitted to Cairns Regional Council to expand the existing Portsmith Bunnings store to an adjacent landholding that would include an additional 2000sqm bulk trade area and 1000sqm staging area. According to the DA, a completed expansion would represent an overall investment of $31 million. In The Cairns Post, the report states:

The proposal involves the expansion of the existing Bunnings Warehouse Store, to facilitate an increase in the range of goods sold and to improve the operational efficiency of the existing facility.
Based on traffic impact assessment, (planners) do not anticipate any adverse impacts to result from the proposed expansion and, therefore, no mitigation works or upgrades are required.

Patrick Siegel, co-director of NQ Building and Construction, said the increased supply of bulk materials the Bunnings' expansion could bring would be beneficial for the city's construction sector. He told The Cairns Post:

It's good to get more competition in town. We need more bulk supply for trades. Supply has been an issue. Hopefully this brings a better range to choose from.

Mr Siegel said customer service at other stores could be better, so he hoped Bunnings' standard of customer service would be high at the expanded store.

At the moment some stores have poor service. But you just have to take it. It's no good.

Port Augusta

A Bunnings store is expected to be built in Port Augusta (SA). Bunnings general manager - store operations Jess Hitchin said the start of the build would begin soon. She told The Transcontinental:

We're pleased to confirm positive progress has been made and we're now hopeful construction of the new Bunnings store can begin in a few months.

The bricks-and-mortar store is located on the corner of Daw Street and the Stuart Highway near the Eyre Highway turnoff.

The DA had been delayed by minor changes, including the lowering of the roof by 15cm and further resealing works of Daw Street.

The store should retain the usual Bunnings layout while the application stated there would be 142 car parks.


Proposed Bunnings store for Port Augusta - HHN Flash, July 2021

Adelaide Hills

Initial construction has begun on the new $40 million Bunnings store in Totness, in the Adelaide Hills (SA). The 16,300sqm site is double the size of the existing Bunnings that is close by.

However, the store would be moved nearer to the freeway under planning changes, reports Messenger-Eastern Courier.

Originally proposed as a two-level building with undercroft parking and a nursery, the changes mean the new Bunnings would now be one level with an uncovered 350-space carpark, requiring a shift west.

It has been moved to incorporate land that would have still been home to other bulky goods outlets, and the changes allow trucks easier access to loading docks.

Developers must also provide a 20-metre buffer of trees or landscaping between roads and buildings. Consultation is taking place with the Department of Infrastructure and Transport (DIT) to grow screening on its land along the Mount Barker freeway entry ramp. Planning consultant Emma Barnes told Messenger-Eastern Courier:

For the streetscaping along the freeway, it will mean that a portion of that landscaping is on DIT land, but it will remain 20-metre in width. There could well have been other bulky goods on that corner, which will now be dedicated to landscaping, which is a good outcome. There would have otherwise been other buildings there.

The project is being led by developer Totness Commercial.

Cleaning category

At the Wesfarmers Strategy Day in mid-2023, Bunnings said it would include more leading brands in its cleaning range, while also widening the variety of products available. During his presentation, Bunnings managing director Mike Schneider said:

Cleaning is another area where we have strengthened our range of authority in response to the elevated and sustained customer demand we saw emerge during the pandemic. We've introduced more market leading brands that consistently attract higher frequency purchases.

See page 22 here:

Wesfarmers Strategy Day - HI News 7.2

Since then, Mr Schneider said he believes a move into the home cleaning market - valued at $5 billion - will see the hardware chain gain a significant slice of the category.

It will be in direct competition with the main supermarkets as well as bulk goods specialist Costco, and targeting consumers, tradies and small businesses that often buy cleaning products such as liquid handwash paper towels in bulk.

Bunnings has a strong focus on bulk packages at better prices for a range of leading popular cleaning brands such as OMO, Finish, Dettol, Sukin, Cold Power, Sard and Hoover.

In-store, the layout varies depending on the size of the store, with the largest outlets having up to four dedicated aisles. To make space for cleaning, Bunnings will tighten its range of window furnishings and curtains which Mr Schneider believes can generate better margins.

As the cleaning products were being launched into stores, Mr Schneider said after 13 interest rate hikes consumers were hunting for value. He told The Australian:

Consumers are incredibly focused on value, probably more than I have really ever seen in any other point of time ...
...What we learned from pets was that really strong value and bulk products are things that are really important for consumers because I think in categories like cleaning, consumers have a really acute eye for the value of a bulk product, right down to the unit of measure.
So consumers are very quick to work out what that equates to 'X dollars' a litre or per 100ml or whatever it is, and by bringing a bulk offering into the market, we are increasing our range by over 200 products ... consumers are really being blown away by the value offering that's there. And we've established some real credibility and trust in another consumable category like pets and translating that into a cleaning range has been really well received.

By the end of 2023, Mr Schneider said:

The recent launch of our expanded cleaning range is all about delivering customers everyday value and an even wider range of necessity products with bigger quantities and better prices. While it is still early days, we're hearing really positive feedback from customers and our data is indicating the range is boosting visitation and cleaning basket size.

Mr Schneider also told The Australian that Bunnings is increasingly focused on home improvement - not just hardware - and the moves into pets and cleaning reflected that repositioning of a brand which has been evolving for many years.

I don't think we have called ourselves a hardware store now probably almost since when I joined in 2005. And the way we talk about our merchandising focus is anything "from the front gate to the back fence". That gives you a fairly strong licence ... Cleaning is a form of home maintenance. Keeping your home clean is as relevant as changing your light bulb or putting mulch in your garden.

Woolworths and Petstock

The Australian Competition and Consumer Commission (ACCC) has given the green light for Woolworths to move ahead with acquiring a controlling stake in speciality pet retailer PETstock.

The deal was initially announced in December 2022 and will see Woolworths buying a 55% stake in Petspiration Group, which trades as PETstock.

The purchase price for the 55% stake is now expected to be $438 million, reduced from $586 million. The adjusted enterprise value is about $1.46 billion, Woolworths said.

ACCC chairwoman Gina Cass-Gottlieb said the regulator had significant concerns that PETstock's previously completed acquisitions (between 2017 and 2022) of the Best Friends Pets, Pet City, and Animal Tuckerbox chains and the Pet & Aquarium Warehouse store in Eltham, Victoria, might have contravened the Competition and Consumer Act.

In response to the ACCC's' concern, the Woolworths and PETstock offered to provide court-enforceable undertakings.

PETstock will sell 41 specialty pet retail stores, 25 co-located veterinary hospitals, four brands and two online retail stores.

As part of its undertakings, PETstock must ensure the sale of the businesses to be divested will result in a standalone, independent and long-term competitor nationally and in local markets, and that the buyer can compete with PETstock in pet specialty retail. It must also keep those businesses in question competitive and economically viable until they are divested.

The ACCC has accepted the undertakings and will not oppose the proposed acquisition.

The COVID-19 pet boom spurred Woolworths to invest in the $10 billion specialty pet sector last December, according to the Australian Financial Review (AFR).

PETstock is the second-biggest player in the sector behind TPG Capital's Greencross. PETstock continued to grow over the past year with underlying sales increasing by 10% to $892 million in the 12 months to October and underlying EBITDA relatively stable at $125 million, Woolworths said.


Woolworths takes majority stake in PETstock - HNN Flash, December 2022

Property deal

The country's largest owner of Bunnings warehouses, BWP Trust is striking a deal to take over smaller landlord Newmark Property REIT - whose tenants include Bunnings, Officeworks and Kmart. BWP Trust is the owner of 75 mostly Bunnings Warehouses.

Under the bid, BWP - which has a market capitalisation of $2.2 billion - would buy all shares in Newmark in an off-market takeover comprising 0.4 BWP shares for every one Newmark share owned.

The Newmark board supports the proposal, which values NPR shares at a 43% premium. Newmark has a market capitalisation of nearly $181 million.

According to The Australian, the deal is billed as an opportunity to combine two complementary portfolios of quality assets and similar tenant profiles. It creates a combined portfolio of $3.5 billion and sets up the Bunnings-owning trust for long-term capital growth.

The combined portfolio will remain heavily exposed to Wesfarmers' businesses, reports the AFR. That would make it harder for the landlord to negotiate higher rents, Jarden analyst Lou Pirenc said in the AFR.

It's hard to push Wesfarmers to increase rents when in most locations it's not as if you can kick them out and replace them with a non-Bunnings. Most sites will be fairly specific for Bunnings.

In The West Australian, UBS analyst Tom Bodor maintained his "sell" rating on BWP, based on "challenged earnings growth given low returns on development spend, unfavourable new leases with Bunnings, higher debt costs and inflation normalising".

  • Sources: The Transcontinental, Messenger-Eastern Courier, The Cairns Post, The Australian, Retail Insight Network, The West Australian and The Australian Financial Review
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