Wesfarmers’ hardware arm, Bunnings, has forecast further grow as rival Woolworths plans to enter the competitive hardware market.
Bunnings managing director John Gillam told reporters today that Bunnings had eight stores under construction and its development pipeline beyond that was in a ‘‘terrific state’’, planning to open 10 to 14 stores per year.
‘‘As we look out for the full financial year, we see growth in both our cash, retail and our trade markets,’’ he said. ‘‘Obviously the retail level growth is going to be tempered because the Australian government consumer stimulus isn’t there this year when it was there last year.‘‘The flip side applies to the trade because there’s three strong programs that the government put in place with an eye to try bridge a gap between recovery and housing starts.’’
The retailer said its strong balance sheet had enabled it to buy property during thedownturn.
Bunnings also said it had recently expanded into kitchen appliances after launching a kitchen fitout category about two years ago.
The retailer said it was selling 400 kitchens a week in Australia and expected strong sales from its appliance category, which include new range of stoves and cooktops.
‘‘Having got the kitchen right, the feedback from the customer was please can we buy some appliances as well’,’’ Bunnings general manager for merchandising and marketing Clive Duncan said.
He added that whitegoods were not on Bunnings’ ‘‘immediate agenda’’.
On Friday the hardware retailer said it achieved cash earnings store-on-store growth of 15 per cent in the first quarter of 2009/10 by opening six stores and two trade centres in the July-to-October period.
Bunnings has forecast high single-digit growth for the full year.
The retailer also refuted suggestions from Woolworths that there are areas of the hardware sector not being serviced.
Mr Gillam said Woolworths was underestimating the Australian hardware industry when it said there were areas of the sector not being serviced.
‘‘I’m not sure if under-serviced is correct,’’ Mr Gillam said. ‘‘There are a lot of businesses that focus on the full spectrum of products from a pure category play and we’ve obviously focused on having the whole lot.’’
He said rivals like Mitre 10 and Danks had traditional corner store outlets as well as larger stores that covered most categories.
‘‘The market has evolved a lot over time and the market continues to evolve but we’ve only got 14 per cent (market share) so we’re focused on where we can do on our business, ’’ Mr Gillam said when asked if there was room for another competitor.
Woolworths and US home-improvement chain Lowe’s are hoping to take on Bunnings, which has been a successful hardware chain and cash cow for Wesfarmers, and carve up Australia’s $24 billion hardware market.
However, the Australian Competition and Consumer Commission (ACCC) could prevent Woolworths from taking over Danks, Australia’s second largest hardware retailer, because of competition concerns.
Mr Gillam said Bunnings had made a submission to the ACCC about the Woolworth’s proposal.
‘‘We were neither for nor against it ... we simply answered the questions (asked by the ACCC)),’’ he said.
Conglomerate Wesfarmers also own supermarket Coles, which reported better than expected first quarter results on Friday and showed that it was gaining on its main rival Woolworths.
Coles’ food and liquor sales rose 7.3 per cent in the quarter while Woolworths had announced a 7.8 per cent rise in food and liquor sales for the September quarter days earlier.
Wesfarmers shares closed 34 cents higher at $28.60, while Woolworths lost 23 cent to $29.08.
AAP
