Wesfarmers Limited · ASX:WES
Wesfarmers — UBS Warburg Retail Conference, Sydney 2002
27 slides from Wesfarmers's conference presentation, Jun 5, 2002
Slide 1: Strategy Development Bunnings Warehouse
STRATEGY DEVELOPMENT BUNNINGS WAREHOUSE
Slide 2: Agenda
AGENDA 1. Historical performance 2. Warehouse retailing entry strategies BBC - Bunnings 3. Integration of BBC 4. Future directions 5. Current trading results 6. Questions
Slide 3: History 1992 - 2001: Sales
History 1992 - 2001 Sales (CAGR 27%) 1,600 47 Warehouses 1,400 Operating 1,200 1,000 Commence $m 800 McEwans Warehouse Acquisition Rollout 600 400 200 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Slide 4: History 1992 - 2001: EBIT
History 1992 - 2001 EBIT (CAGR 32%) 160 140 Property Trust 120 100 $m 80 McEwans Commence Acquisition Warehouse Rollout 60 Costs 40 20 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 EBIT on pre-goodwill basis
Slide 5: Burns Philp Entry Strategy
BURNS PHILP ENTRY STRATEGY • Poor track record - low ROC 80’s - 90’s • Group financial pressure to exit hardware • > 80% reliance on housing industry • Home Depot concept offered sale premium
Slide 6: Burns Philp Entry Strategy
BURNS PHILP ENTRY STRATEGY • Numbers the priority - not standards • 5 opened without time for proper research • 1994 sold to Howard Smith - $80m premium • Still heavy trade influence in business • Large conventional stores with Warehouse racking
Slide 7: Bunnings Entry Strategy
BUNNINGS ENTRY STRATEGY • Monitored US & UK development since inception • Repositioned Bunnings in 91 to focus on DIY • Pre 1990 similar issues to BBC - housing dependence • Aware of consequences of Warehouse roll out • A true paradigm shift if properly done
Slide 8: Repositioning Strategy - 1991 On
REPOSITIONING STRATEGY - 1991 ON • A total co-ordinated package developed • Logo - Colour - Adv style - Pricing - Product range • Customer service standards lifted - feedback • Performance culture • Information systems upgraded • Margin management systems introduced
Slide 9: Repositioning Strategy - 1991 On
REPOSITIONING STRATEGY - 1991 ON • 1993 - Purchased McEwans • Restructured to make profit • Similar repositioning repeated • Same dramatic increase in performance • EBIT ROC > 50% on trading activities
Slide 10: Bunnings Warehouse Brand Development
BUNNINGS WAREHOUSE BRAND DEVELOPMENT • 2 years intensive research • Objective was to develop a national chain of warehouse stores which set the industry benchmark for profitability and return on investment • The best - not the biggest • A balanced package with the focus on DIY
Slide 11: Bunnings Warehouse Brand Development
BUNNINGS WAREHOUSE BRAND DEVELOPMENT • Demographic study all markets - location planning • Developed market positioning – Widest range - Depth in range – Lowest price position - EDLP – Better service levels - Unconventional • Branding & advertising strategy - Lionel - Line
Slide 12: Bunnings Warehouse Brand Development
BUNNINGS WAREHOUSE BRAND DEVELOPMENT • Store layout & fixture development - (3 sizes) • Building specifications - no frills • Technology & systems development - volume focus • Regulations - OH & S - Hazardous chemical issues
Slide 13: Bunnings Warehouse Brand Development
BUNNINGS WAREHOUSE BRAND DEVELOPMENT • Customer services - Points of difference • Cultural development - Induction - Recruitment • EBA negotiated prior to commencement • Benchmarks established - standards high as possible
Slide 14: Typical Benchmark for a Warehouse Store
TYPICAL BENCHMARK FOR A WAREHOUSE STORE BBC Bunnings Conventional Unconventional Hardware Hardware Approach Approach Sales $17.5m $27.5 m EBIT/Sales ratio 6% - 10% 6% - 10% Capital Employed $6.0m $7.0m - $7.5m (excluding Property) ROC 15% - 30% 25% - 40% Stock levels Normal Higher Staff levels Norma
Slide 15: Why Focus on DIY Market
WHY FOCUS ON DIY MARKET • Successful overseas operators focussed on DIY • Market share at expense of traditional and specialist stores • Had strong expertise with DIY consumers • Suits 7 day business - weekend demand • Strong growth market past 20 years and continue • Housing market volatile
Slide 16: Why a Successful Transition
WHY A SUCCESSFUL TRANSITION • Prepared business for change • Research done thoroughly • Good cohesive strategy developed • Execution capabilities built quickly • Committed team that thrives on success
Slide 17: What Has Been Achieved in 8 Years
WHAT HAS BEEN ACHIEVED IN 8 YEARS • A strong performance culture • Best merchandising skills - supplier associations • Well developed and proven warehousing formula • Store layout and development capabilities • Staff recruitment and training programs
Slide 18: What Has Been Achieved in 8 Years
WHAT HAS BEEN ACHIEVED IN 8 YEARS • High team commitment - Low turnover • Modern, flexible technology base • A great business with potential to improve further • Great results
Slide 19: BBC Acquisition - Aug 2001
BBC ACQUISITION - AUG 2001 • Doubles turnover to > $3b on full year basis • Warehouse store numbers increase from 51 to 111 • Other outlet numbers increase from 37 to 175 • Proportion of retails sales drops from 85% to 75% • Good geographic spread
Slide 20: Store Numbers
STORE NUMBERS June 01 Openings Closures June 02 Warehouse 107 7 3 111 Traditional 164 27 137 TOTAL 271 7 30 248
Slide 21: Store Numbers - 2002
STORE NUMBERS - 2002 2 Totals 111 Warehouses Other 21 Outlets 18 137 16 (inc WA Salvage) 28 3 36 4 41 30 7 3 36 2 1 * Internal estimate for 30 June 2002
Slide 22: BBC/Hardwarehouse Integration
BBC/HARDWAREHOUSE INTEGRATION Outstanding Issues to Complete - February Report • Trade business and support systems review • Frame & Truss Plant operations • Wholesaling operations (Timber and Panel) • New Zealand integration • Modifications to POS system • Audit of synergy benefits
Slide 23: Future Direction
FUTURE DIRECTION • Continued rationalisation of traditional stores Upgrade/conversion to Bunnings • Continued rollout of Warehouse network (10-12 p.a.) • Technology Development Trade Intranet Internet (BITS) Store Processes • Management development for growth
Slide 24: Trading Results (9 mths to 31st March)
TRADING RESULTS (9 mths to 31st March) Actual Raw Results Reported 1/7/01-31/3/02 Results Sales 2.4 bn 2.3 bn To budget + 1% + 1% To last year + 16% + 121% Strong retail sales + 19% Strong trade sales + 7% Good store on store growth
Slide 25: Trading Results (9 mths to 31st March)
TRADING RESULTS (9 mths to 31st March) EBIT Post Goodwill 187 m To L/Year + 75% Pre Goodwill 222 m To L/Year + 100% Overall - on target.
Slide 26: Questions?
QUESTIONS ?
Slide 27: Thank You
AUNINIINC ES warehouse LOWEST PRICES ARE JUST THE THANK YOU BEGINNING .. .
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