DIY giant Bunnings has met its match in the form of rival Metcash, with the hardware retailer fighting hard for its share of the $1.5 billion professional tools sector.
Metcash splashed $57 million on trade retailer Total Tools last September, while Bunnings’ proposed acquisition of Adelaide Tools received regulatory approval a year ago.
According to The Australian Financial Review, Metcash plans to spend $95 million over the next three years opening 42 stores and refurbishing many of the existing Total Tools stores.
Meanwhile, Adelaide tools has only five stores – all in SA – and Bunnings reportedly plans to open several stores outside the state.
Metcash and Bunnings will go head-to-head during the coming years as both companies continue on their respective aggressive acquisition trails in the professional tools sector.
Goldman Sachs analyst Andrew McLennan said the race to be top dog in the tools market is heating up.
“This looks very much like a space race,” McLennan said. “[Bunnings] is starting a long way back [in the trade tools market] but has a huge amount of capital.”
Total Tools boss Mark Laidlaw said while he is not worried about Bunnings as his group expands nationally, he knows the retailer will succeed in reeling in th tradies.
“Bunnings is very good at what they do; they’re moving into that specialist trade area, as we are, and they don’t do things by halves, they’ll do it well,” he said.
Bunnings is looking to outlay a lot of cash into expansion, after the home improvement chain posted bumper sales for the half-year, with $1 billion clocked in before-tax earnings.
The Wesfarmers-owned store saw revenue increase by 24.4 per cent to $9.054 million, with earnings increasing by 35.8 per cent to $1.274 billion.
Bunnings was the standout retailer of the group, with the hardware store the best performing division by a country mile.
The strong results were driven by a boom in home DIY sales as customers stayed at home during the pandemic lockdown.
“The strength of the sales and earnings reflected Bunnings’ solid execution of the strategic agenda and the ability of the operation model to successfully adapt to changing customer behaviour and environments,” Wesfarmers managing director Rob Scott said.
“Bunnings continued to invest in the customers experience through its commitment to lowest prices, expansion of online product ranges and upgrades to in-store product displays across kitchen and garage organisation ranges. Travel restrictions and customers spending more time undertaking projects at home continued to support sales growth.”
In its outlook for the rest of 2021, the group expects a downturn in sales after the pandemic growth slows.
“Retail sales growth is expected to moderate from March as the as the businesses begin to cycle the initial impacts of COVID-19 in the prior year, particularly in Bunnings and Officeworks,” the report reads.
