Masters explodes out of the blocks but Dick Smith under formal review

Sales in Woolworths’ five new Masters stores are “well ahead of budget”, according to Woolworths Limited CEO Grant O’Brien.

Speaking to investors and potential investors, O’Brien reported a strong customer reaction to Masters’ format, range and pricing. Masters is a big box home improvement, appliances and electronics venture in partnership with American retailing behemoth Lowe’s.

To add to the five stores in Victoria (1) and Queensland (4), Woolworths is opening outlets in Gregory Hills (southwest Sydney, NSW) and Burnside (northwest Melbourne, Victoria) by the end of January 2012. O’Brien further reported 16 more stores are currently under construction.

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Under the header “Key Elements to Success”, O’Brien outlined the key tactics to providing growth for Masters. He said Masters had 100 sites “in the pipeline”, with goal of 150 by 2016; was leveraging its international relationships to source product; had a centralised supply chain model to lower costs; and had a “unique end-to-end home improvement range”.

O’Brien was less enthusiastic about the Dick Smith business, which is now undergoing a formal review. Although O’Brien showcased the strength of Dick Smith’s online sales platform, he noted that too many bricks and mortar stores were underperforming.

“Online sales continue to grow with industry recognition of the strength of the Dick Smith offer. Whilst the strategy is moving in the right direction there is a long tail of underperforming stores with a tough sector undergoing significant change globally and experiencing a high level of price deflation.

“As a consequence, we have initiated a full strategic review, aided by industry experts, of all options to validate our existing strategy or to suggest an alternative to deliver shareholder value.”

O’Brien said this report will be delivered in February 2012.

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