Bunnings banks on broader range, more services

Hardware giant Bunnings is tipping a turnaround in the home improvement sector but won't rely on it for sales growth, preferring to improve services and increase its product range.

Managing director John Gillam said sales in the fourth quarter "continued on in a pretty similar vein" to the third quarter, when sales grew by 4.7 per cent, or 4.3 per cent when the benefit of new store openings was excluded. The chain had benefited from the federal household assistance that began in the past two months before the introduction of the carbon tax, lifting some of the gloom that has continued to dog the discretionary retail sector.

"Whenever there's any form of government stimulus like that, it's very obvious that you're going to see it," he said.

"If I look at the next 12 months, for the home improvement sector . . . I think we'll see less headwinds than the last 12 months.

 

"But whether that swings across to a full positive or is just neutral -- a lower growth scenario -- time will tell."
As part of a program to reposition its range, Bunnings has scrapped about 10 per cent of its products in the past 18 months to remove duplication and underperforming lines, filling the space with new and specialty products such as kitchen cabinets.

"Innovation with our key partners is a significant part of why we've outperformed the market," Mr Gillam said.

The company had also moved to lock in suppliers to exclusive agreements, with about 8 per cent of merchandise now stocked only by Bunnings and a further 8 per cent made up of in-house brands.

Mr Gillam denied Bunnings had threatened to drop suppliers selling to the Woolworths' hardware business Masters, which is expected to have about 15 big-box stores by the end of the month after opening its first in September.

"You can't threaten people, that is no way to do business," he said, adding that more than 75 per cent of the product range was available from other retailers -- something Bunnings wanted to maintain to show it could sell the same product cheaper.

Meanwhile, US big-box discounter Costco yesterday confirmed its fourth Australian store would be located in the Melbourne suburb of Ringwood.

Costco Australia managing director Patrick Noone said the company had not been affected by the consumer spending downturn, with trading "reasonably brisk" in the past month.

Source: http://www.theaustralian.com.au/business/companies/bunnings-gambles-on-services-and-broader-product-range/story-fn91v9q3-1226429437927