Bunnings eyes acquisitions to draw tradie dollar

04/06/2021

Bunnings

Image source: bunnings.com.au

Bunnings now plans to construct a trans-Tasman network of specialist tools stores, flagging additional bolt-on acquisitions to grab a bigger share of the home and commercial construction markets, according to a recent Australian Financial Review report.

Bunnings Managing Director Michael Schneider has revealed plans to open up to 75 trade tools stores in Australia, as well as New Zealand, over the next three to five years, beginning in Western Australia later this year after its successful acquisition of Adelaide Tools just under two years ago.

Stores outside South Australia will not trade under the Adelaide Tools banner with Bunnings, which has recently lodged trademark applications for Benchmark Tools, Project Tools, Dontas Tools and Onya Tools, plans to reveal a new name in coming months.

Speaking with investors and analysts at Wesfarmers’ annual strategy presentation, Mr Schneider suggested Bunnings was considering more bolt-on acquisitions after agreeing to acquire Beaumont Tiles in April.

Mr Schneider said tradespersons had a tendency to shop for items such as power tools, floor coverings, lighting and plumbing from retailers besides Bunnings.

“Many of those [professional tools products] don’t have a natural home within the product architecture of the Bunnings format,” Mr Schneider said.

“We have low penetration in the flooring trade, they don’t see the Bunnings format as relevant to them as specialist trades,” he said. “Some brands don’t see the Bunnings format as the right place for their brand to be sold.”

Opening up stand-alone shops as well as acquiring speciality hardware retailers would allow Bunnings to deepen its connection with the professionals, he said.

“We’re always interested in categories where we’re not able to service customers effectively through the Bunnings format,” he said.

“If there are sensible opportunities that present themselves and they fit the criteria we are looking for … we might look at it “But we’ll certainly be focused on the ones we’ve got and the ones we’re waiting approval for.”

Experts fear a space race is emerging in the $1.5 billion professional tools sector as Bunnings and Metcash compete for a bigger share marketplace from family-owned stores and also co-ops, according to the report from the Australian Financial Review.

Metcash outlaid $57 million to get a 70 per cent share in Total Tools last September and also plans to invest $95 million in the next three years opening a minimum of 42 shops, refurbishing much of the 88 existing stores and transforming some franchised stores to joint ventures to fund growth.

At the same time, family-owned chains Sydney Tools as well as Brisbane-based TradeTools are also opening stores at a quick rate, capitalising on strong demand during the pandemic — from both tradespersons and do-it-yourselfers — for professional tools such as drills, sanders, round saws as well as air compressors.

Mr Schneider said in the report that he believes sales at new stores will certainly be sustained by solid development in the housing and building and construction markets.

“There is very strong demand across Australia for trades and clearly lots of pressure on different markets, we are seeing more being done at the apprentices level to grow employment,” he said.

“It is clear that across housing and construction there is real demand. We do not play in the heavy construction trade market, but tradies and professionals are looking for product and brand specialists … that’s where we see that growth coming from.”

Bunnings, which represents almost 60 per cent of Wesfarmers’ group profits, has been the star performer in the portfolio in the past two years and has been rewarded with additional accessibility to capital to increase and invest its stores as well as its digital offer.

Bunnings’ earnings jumped 36 per cent to $1.27 billion and total sales by 24 per cent to $9 billion in the December-half, assisted by the opening of nine new warehouses and two new small-format stores.

Same-store sales rose 27.7 per cent (versus 4.7 per cent in the year ago period) – even though the hardware retailer closed stores to retail customers in Melbourne for three months, according to the report.

However, sales growth is believed to have slowed in recent months as the home improvement giant cycles a pandemic-inspired boom in sales last year. According to Citigroup, Bunnings’ sales growth slowed to two per cent over the past five months, with hardware, building and garden supplies sales fell 0.3 per cent month-on-month and 5.1 per cent year-on-year, seasonally adjusted, in April, according to the latest ABS retail sales figures.