Wesfarmers has admitted it is reviewing the future of Bunnings in the UK after revealing a AUS$1bn write-down relating to its Homebase acquisition.

The Australian retail group is set to between 20 and 40 UK stores and said it would not rule out exiting the UK completely, although managing director Rob Scott emphasised that it was not his preferred option.

Speaking to investors in Sydney, the group acknowledged that it had botched its 2016 takeover of Homebase.

At the time, Wesfarmers cleared out UK Homebase management wholesale, instating a new team from Australia.

Scott said that the loss of management knowledge combined with the slow pace of the transition to the Bunnings brand and the decision to remove product lines such as homewares had all hurt performance.

He maintained that while execution was poor, Wesfarmers’ strategic rationale for acquiring Homebase was solid.

The debacle is a blow to Wesfarmers’ international expansion plans, which relied on the success of the Homebase to Bunnings conversion.

Scott added: “A lot of the issues we are dealing with today, to be frank, were self-induced. We now have a team that understands the UK market, we have a number of opportunities to improve performance and that is what we are very much focused on. But all options are open.”

UK reshuffle and losses

Wesfarmers revealed that former B&Q director Damian McGloughlin has permanently replaced Peter ‘PJ’ Davis, a Wesfarmers executive who had been charged with establishing the UK business and has now retired.

It was previously understood that Davies was taking three months leave from the UK business.

Former finance director Rodney Boys has also parted ways with the UK arm and returned to Australia. He has been replaced by former Coles, Sainsbury’s and Tesco director Andy Coleman. 

Wesfarmers said the UK division of Bunnings was likely to report an underlying loss, before tax and interest, of £97m for the first half of 2018.

The business also turned a loss in its maiden full year. Losses before inflation and tax totalled £54m in the 12 months to June 30.

So far, it has cost Wesfarmers £50m to rebrand 19 Homebase stores as Bunnings. Exiting the UK completely would hit the Australian chain hard due to £1bn in outstanding lease liabilities.