Woolworths’ decision to exit Masters may be a step closer.
US hardware giant Lowe’s, which is Woolworths’ partner in the Masters venture, has recorded a $23.64 million loss on its 33% stake, which implies a $69 million loss in the latest quarter for Masters.
The Masters home-improvement chain represents a difficult decision for Woolworths’ new board and management because of the size of the business’ ongoing losses, according to Australian retail stockbroking and wealth management firm, Morgans.
The broker believes pressure on Woolworths to exit the business is reasonable, but doing so would make the company even more reliant on supermarkets at a time when their profitability is being squeezed by a price war.
“Management clearly needs to execute better, though, as these losses can’t be sustained forever,” Morgans stated.
Woolworths chairman Gordon Cairns has reportedly been meeting with shareholders to look at the options for the Masters business, including liquidation, trading through losses and finding a buyer.
Bank of America Merrill Lynch claims that Masters is on track to hit its forecast losses of $290 million in 2016 and $355 million in 2017.