Following its purchase of Coles Group in 2007, diversified conglomerate Wesfarmers became one of Australia's two biggest retail groups, home to a collection of different chains. The most significant of these is Coles itself, the country's second largest grocery retailer, now battling to regain its lead over arch-rival Woolworths. The supermarket chain is partnered by a selection of other sizeable local brands including general retailers Kmart and Target and leading home improvement store Bunnings. Wesfarmers' acquisition of Coles Group, a business three times larger than itself, was designed to call a halt to several years of steadily declining performance as Coles struggled to make sense of its sprawling retail operations. It also brought greater focus to Wesfarmers itself, which up until then had dabbled in a wide variety of different sectors ranging from mining and chemicals to insurance and DIY. Following the Coles purchase, almost 90% of Wesfarmers' revenues are generated by retail. Coles and Wesfarmers both celebrated their centenaries in 2014. The group took its first steps into the UK in 2016 with a deal to acquire local DIY chain Homebase.
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Adbrands Weekly Update 1st Sep 2016: Australia's biggest supermarket group Woolworths, a former high-flyer that has been struggling with poor performance for the past 18 months, reported a shock loss for the financial year to June. Reported revenues of A$58.1bn (around US$42bn) were 4% less than last year, but a 40% slump in earnings in its core grocery business and a huge write-off against its disastrous move into home improvement, resulted in a net loss of A$1.2bn. Woolworths' main rival Wesfarmers, the owner of Coles and Bunnings, also delivered a disappointing set of results with large impairments against its general retail chain Target and heritage coal mining operations. Net profits plunged 83% to A$407m, despite a 6% increase in revenues to A$66bn.
Adbrands Weekly Update 21st Jan 2016: Australian conglomerate Wesfarmers confirmed the acquisition of UK-based DIY and gardening chain Homebase for £340m. It will become a local partner to the group's Australian business Bunnings, the leading Ozzie home improvement chain. Wesfarmers is expected to phase out the Homebase name in favour of the Bunnings brand. The announcement coincided with related news from Wesfarmers' domestic rival Woolworths, which said it is pulling the plug on its own struggling DIY chain Masters, a joint venture with America's Lowe's. The sale of Homebase also significantly boosts Sainsbury's chances in its pursuit of Homebase's sister chain within Home Retail Group, Argos.
Adbrands Weekly Update 14th Jan 2016: UK supermarket Sainsbury's continued to press its case to acquire local general merchandise partner Home Retail Group, with a new financial proposal expected imminently, though so far few institutional shareholders have been persuaded to voice their support. Intriguingly all talk has been of synergies between Sainsbury's and HRG's Argos business, with second-string DIY chain Homebase conspicuously absent from any discussion. Stories have begun to emerge that Australian group Wesfarmers - which owns that country's Coles supermarket business as well as DIY chain Bunnings - is engaged in separate negotiations to add Homebase to its portfolio for £340m in cash.
Adbrands Weekly Update 3rd Sept 2015: The "Aldi effect" was apparent in the full year results from Australia's biggest supermarket group Woolworths. Just as UK supermarkets are reeling from the competition with German discounters, so are their Australian counterparts. Woolworths reported a near-13% fall in net profits, the first decline in almost two decades, following a disastrous attempt to match Aldi's low price strategy. Chief executive Grant O'Brien has already agreed to leave the group as soon as a successor can be found. Now, group chairman Ralph Waters will precede him out of the door. Woolworths net profit was A$2.15bn on flat revenues of A$61.15bn. In fact, the main culprits for the flat topline were a steep decline in petrol sales (as a result of falling prices) and weak performance at the group's Big W general merchandise business. But analysts have been alarmed by the strategic confusion at the supermarket business, which abandoned its long-established premium positioning during the year in favour of "Cheap Cheap" pricing. In fact Woolworths' results were not much worse than those of arch-rival Wesfarmers, owner of rival supermarket Coles, which quickly adopted the "fresh food" premium positioning abandoned by its rival. Group revenues were flat here too at A$62.45bn, while net profit fell 9% to A$2.44bn. However the Coles grocery division enjoyed solid increases in both sales and operating profit.
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