By Claire Reilly
In a trade update issued to the public yesterday, Masters Home Improvement parent company Woolworths Limited revealed that the DIY chain has been hit by over $150 million in losses over the past financial year and that the group had set “overly optimistic sales targets budgets” that it had failed to meet.
As a result of these factors, as well as lower than expected gross margins and high wage costs, Woolworths Market Update for the first month of the new financial year appeared as something of a Masters Mea Culpa where finances were concerned.
Despite this, the brand has grand plans for expansion over the coming years, foreshadowing plans to have 90 stores in operation by the 2016 financial year. According to a spokesperson for Woolworths, the company is forecasting that it will break even in FY16, based on these store roll out plans. At the end of the 2013 financial year Masters had 31 stores open and the retailer currently has "120 active sites in total", indicating almost 90 other sites are in the pipeline.
“This forecast assumes moderate growth in sales per store for a start up business, improvements in gross margin as the sales mix stabilises, efficiencies in store and increased fractionalisation of costs in the distribution and support network as sales levels increase.”
Referring to “the greenfields nature of the Masters business” — indicating a business that converts operating space from land previously used for agricultural purposes, Woolworthis indicated that “short term results will continue to vary” though the company expects “the losses for FY14 not to exceed this year’s level”.
Among the grim figures in yesterday’s market update, Woolworths did draw out increasing brand recognition and a strong online presence as winning elements of the Masters business.
According to the release, Masters’ online site is receiving “around 25,000 visitors everyday and growing”. The site has a strong focus on “Ideas and Inspiration” trying to appeal to non-trade consumers with notes on decorating and colour trends and how-to videos of home improvement basics.
Tied in with this approach is the retail brand’s sponsorship of the Channel 7 home improvement show, House Rules, which Woolworths said was initiated to help “confirm [Masters’] increasing presence in major markets”.