It’s an audacious move but, when the dust settles, will Wesfarmers’ decision be judged a brave stroke of genius or a rash, arrogant manoeuvre?
Wesfarmers’ £340m deal to acquire Homebase formally went through on Monday, which is when, I am told, the Australian group informed the DIY retailer’s top five execs that their services were no longer required.
The extent of the boardroom clear out has come as a shock to many industry watchers, and divided opinion, going by comments on social media and on our own article.
While Wesfarmers in January had made it abundantly clear it wanted to install its own management, few would have predicted it would be serving P45s to the whole leadership team.
“While Wesfarmers in January had made it clear it wanted to install its own management, few would have predicted it would be serving P45s to the whole leadership team”
Homebase obviously needed a new direction, its sales have been lacklustre for a number of years and its position in the market was waning. But to get rid of that level of seniority and experience in UK retail looks rash at best.
Conlumino boss Neil Saunders raised questions over Wesfarmers’ move. He tweeted me: “Certainly new blood is needed, but a phased changing of the guard is most sensible, in my view.”
Particularly as Wesfarmers has very little experience trading overseas. All its operations are focused on Australia and New Zealand.
And by planning to replace Homebase’s seasoned management team with its own, is Wesfarmers making the assumption that its tried and tested – and it has to be said very successful – Australian model will work just as well over here as it does down under?
If so, does that show a stark level of complacency and an underestimation of the fierce competition in the UK retail sector? It may have lost some of its shine in recent years, but let’s not forget B&Q is the flagship brand of the third largest home improvement retailer in the world, Kingfisher. B&Q is the market leader here and, arguably, much more of a force to be reckoned with than any competition Wesfarmers faces in its home market.
Saunders adds: “I have a feeling that they think they are going to replicate the Australian model over here. That’s fine, but the big difference is that they don’t have Kingfisher in Australia. [There’s] a different dynamic in the UK.”
On the other hand, though, Wesfarmers is a successful retail business. In Bunnings it has one of the most profitable DIY businesses in the world, and it has a team of people with vast experience of the UK retail market thanks to its other retail brands that include grocer Coles and general merchandise business Target.
“What the move does tell us about Wesfarmers is that it certainly means business in the UK”
What the move does tell us about Wesfarmers is that it certainly means business in the UK. And one has to wonder if B&Q knows what’s about to hit it. Let’s face it, its crown has been slipping in recent years as it suffered from a contracting home improvement market.
Kingfisher chief executive Véronique Laury played down Bunnings’ arrival back in January: “It’s a good thing to have strong competition in the UK. I don’t think it’s a risk. Kingfisher is already well positioned on price.”
And it won’t just be B&Q in the firing line, but Wickes too, as Bunnings is known to have a strong trade offer. One might wonder if Bunnings’ arrival might reinvigorate B&Q and Wickes in the same way Best Buy did Dixons; by the time the US electricals giant landed here Dixons had strengthened its offer to such an extent Best Buy found it impossible to compete, exiting the UK soon after it launched.
Whatever the response will be from the UK’s DIY giants, Wesfarmers has set the cat among the pigeons with its leadership move.
As one person commented on our website today, Wesfarmers are “either the smartest people in the room or the dumbest”.
The conversation has begun. What’s your view, how might it play out?
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