Woolworths intends to exit its failing Masters Home Improvement business as well as Home Timber and Hardware through a prospective sale or wind-up process.
The two businesses launched in Australia through a joint venture with US-based Lowe’s Companies Inc, with Woolworths announcing it can no longer sustain the losses of the Masters business and over the next several months it plans to end its involvement with the business.
In the ASX, Woolworths' chairman Gordon Cairns says: “Upon being appointed as chairman, one of our top priorities was to determine the future of the Home Improvement joint venture. In keeping with the spirit of the joint venture we have actively been engaging with our partner Lowe’s on this issue.
“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.
Woolworths says its top priority is to do the right thing by its employees, suppliers, customers and shareholders, saying it will act "quickly and openly" to minimise the impact of this decision.\
Woolworths has previously said that overhauling the Master business was high on its priorities list, with Cairns previously noting the opportunity in home improvements is compelling and that it is a growing market, however it has with a high degree of fragmentation, adding: “there is plenty of room for a strong number two”.
If it is unable to sell all of the business and has to close any of the operations, Woolworths says it will seek to provide alternate employment opportunities within the Woolworths Group to all current Home Improvement employees.
The retail giant says it will honour 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. Any gift cards can already be used at other Woolworths Group stores.
The announcement comes on the same day as Wesfamers announced it was buying UK retailer Home Group for $705 million, with plans to expand the brand in market, showing the disparity between the two rival companies.
Match Media won the $20 million Home Improvement account for Woolworths in September 2014, tying up the last loose end of a drawn out pitch process that ended with Carat retaining most of Woolworths' $200m-plus account.
Match was tasked with helping to turn around the fortunes of the struggling home improvements business. The agency, led by John Preston, provided all strategy, planning and media buying services for Masters.
Cummins&Partners handles the creative for both the Masters and the Home Timber and Hardware account.
At Woolworths' AGM in November last year, its chairman agreed the firm needed to “urgently address the future of the business”.
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