Woolworths considers pulling out of Masters, following a Lowe’s buyout
Woolworths has finally succumbed to the losses incurred by its home improvement venture, Masters, over the last four years. It is currently considering options of selling or shutting down all 63 stores in Australia, endangering almost 7000 jobs.
According to ABC News, Woolworths chairman Gordon Cairns said in a statement "Our recent review of operating performance indicates it will take many years for Masters to become profitable. We have determined we cannot continue to sustain ongoing losses from this business." He further stated "We intend to pursue an orderly prospective sale or wind-up of the business. This enables full ownership of the business by Woolworths in a shorter timeframe and gives us access to the widest range of exit options."
The news came as a big relief to the investors when its shares jumped to $1.18, or 5.2%, to $23.84 by 1146 AEDT, as represented by 9News. The supermarket giant will finally be able to concentrate on its core business, the 'Big W' division. This move is expected to see a more competitive market leading to lowering of prices.
However, exiting Masters would require full ownership by Woolworths, for which it has proposed to buy out the 33.3% stake held by its US-based joint venture partner, Lowe's in the Home Timber & Hardware section. However, the buyout involves a complicated process of 'put' and 'call' options and can take 'several months' to complete.
"Whilst we will move as quickly as possible, the put and call options process will take at least two months to complete and following this a potential sale process or other exit process will take additional time," were Mr. Cairns' words.
But the stores would continue their normal trading operations till a conclusion of a possible buyout or complete dissolution comes into the picture.
"Woolworths will honor all gift certificates, product warranties, returns, and lay-bys and the completion of any contracted home improvement projects such as kitchens, bathrooms and floor coverings," Monday's statement read, as per Daily Mail. "Any gift cards can already be used at other Woolworths Group stores." The company also mentioned that all the Masters employees will be absorbed within the group should a shut-down of the outlets were to take place.
The decision came soon after its arch rival, Wesfarmers divulged its plans of expanding by buying out around 265 Homebase stores of UK's Home Retail Group with a focus on rebranding its chain, Bunnings. Woolworths was already through with its firefighting phase, and this news seemed to act as a catalyst in the final decision-making process.