Equities Retail

Wesfarmers shares rise as it sells Homebase for £1

Share this article!

Wesfarmers shares ended the Asian trading session higher as it confirmed it had sold 'disappointing' investment Homebase for £1. The Australian retailer bought the UK DIY chain in 2016, however its rebranding weighed heavily on the investment and it’s taken the decision to cut its losses.

Wesfarmers shares closed 0.91% higher at A$45.52. The stock has had a turbulent first five months of 2018 but is marginally higher than its level at on January 1st.

Wesfarmers sells ‘disappointing’ investment

Wesfarmers acquired Homebase for £340 million, however, it has spent almost three times that amount on restructuring and rebranding – something that has proved disastrous for the UK DIY chain.

“A divestment under the agreed terms is in the best interests of Wesfarmers’ shareholders and will support the ongoing reset and repositioning of the Homebase business,” Wesfarmers’ managing director Robb Scott said.

“The investment has been disappointing, with the problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK,” Scott said.

Wesfarmers’ managing director also said that while a full review of the Homebase business shows it is capable of returning to profit, it would require further investment to do so. And its made decision not to spend any more on the UK store.

What went wrong?

Wesfarmers’ themselves have admitted they made mistakes in its short run of owning the once popular UK brand. Among the problems highlighted by analysts – among others – was the rebranding plan.

Wesfarmers began rebranding Homebase into a no frills-style warehouse store. It removed popular soft furnishings and also let all its previous senior management go.

Wesfarmers has sold Homebase to UK-based Hilco Capital, a fund manager known for its ability to turnaround UK high street stores, including HMV which it bought in 2013.

Under the sale, the 24 Homebase stores that had become Bunnings home depots, will revert to the Homebase brand.

Wesfarmers said it expects to make a loss on the sale of between £200 – £230 million. The sale is set to complete by the end of June 2018.

Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site. Click here for more information.