Shareholders come first

Chastened Wesfarmers vows to focus on returns

WESFARMERS bosses have vowed to focus on delivering returns to shareholders after the company’s disastrous foray into the UK hardware market.

The retail giant announced last month it would exit the UK after burning through almost $1.5 billion in two years on hardware chain Homebase, which it bought for $705 million in 2016 to convert into Bunnings stores.

Wesfarmers’ new managing director Rob Scott (pictured), who took on the role last November, said the company would in future focus on organic growth rather than acquiring new businesses.

“When it comes to allocating big licks of capital, particularly in new businesses, new acquisitions, what I’m reinforcing is that that’s not the main game, right, it’s the icing on the cake,” he told investors in Sydney.

“We will explore it if we feel it delivers superior returns to our shareholders, if not we will return the capital.”

Bunnings managing director Michael Schneider said the Homebase result was very disappointing and he was focused on generating growth in Australia and New Zealand.

“In going forward that will be 100 per cent of my focus,” he said.

Mr Schneider said Bunnings would accelerate its digital capabilities, having already made special-order products, such as lighting, sheds and plants, available to purchase online.

He said the company would eventually move to a clickand-collect option for customers.

“There is no doubt in my mind that that is where we will end up,” Mr Schneider said.

He said the company would focus on boosting the seasonality of its product offering across different stores and positioning itself to help people incorporate smart technologies into their homes.

Wesfarmers chief financial officer Anthony Gianotti said the cash-generation capacity of Wesfarmers’ remaining businesses after the divestment of Coles remained strong, so the company should be able to maintain the current dividend payout ratio.

When Mr Scott announced the decision on the UK venture last month, he said that while the venture was capable of becoming profitable, Wesfarmers was not prepared to tip in any more capital.

“The materiality of the opportunity and risks associated with turnaround are not considered to justify the additional capital and management attention required from Bunnings and Wesfarmers,” Mr Scott said at the time.