Wesfarmers Share Price Hits a Snag On Bunnings UK Loss

Today shares of Wesfarmers Limited [ASX:WES] have sunk by 1.31%.

Recently Wesfarmers have struggled to find a buyer for their home improvement venture in the UK and Ireland.

They have allocated a vast amount of spending in the matter and are set to haemorrhage more, even though they are trying to prevent further spending.

Their shares are now valued at $41.45 which is only a slight decrease from last year’s $45.15.

Wesfarmers specialises in the grocery industry and currently have a total of 223,000 full time employees within their company.

The state of Bunnings UK

In 2016, Wesfarmers paid a total of $705 million for the Bunnings chain, which consisted of 231 stores in total, and 19 outlets.

Unfortunately, the Bunnings UK branch suffered losses, totalling $165 million in the first half of this year. As a result, Wesfarmers decided to write down its investment by $1 billion during the month of February.

WAtoday reported that Bill Grimsey, a man who has run two of Britain’s largest DIY chains, stated that:

The Homebase business is not very well positioned now. It’s overpriced and over rented in terms of the properties – all the properties are far too expensive.

He believes Wesfarmers will find it too difficult to secure any buyers for their Homebase business. Bill feels that Wesfarmers merely paid too much for it, and their strategy of implementing an Australian format into England did not work properly.

Wesfarmers stated that they will cover the closure of underperforming sites by spending $70 million in total.

Wesfarmers are due to report on the status of Bunnings UK by June.

They aim to reshape the face of their business by cutting Coles loose, making them a separate company listed on the ASX.

Regards,

Ryan Clarkson-Ledward,
For Markets & Money

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Ryan Clarkson-Ledward is an Editor at Money Morning.

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