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Wesfarmers, Woolworths hardware battle

Shares in Wesfarmers fell 6 per cent today after Woolworths announced plans to take on the Bunnings business through the takeover of hardware group Danks Holdings.

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Ferndale WA
It is interesting that Bunnings says "We have succeeded by being customer-focused, by providing the widest product range at lowest prices and by delivering the offer with unequalled service. "We constantly innovate and improve and are determined to keep delivering customers the best offer." Realistically, Bunnings have a monopoly in WA. Competition is there but competing stores are few and far between and generally small independents. The opportunity to shop for hardware at an altrnate store will be welcomed.

Melbourne
Oh what a great opportunity this presents for Mitre 10. Since Woolworths seeks to dominate any market it enters Danks current customers cannot hope to buy at the same pricing as Woolies/Lowes bannered stores, thus they will be left without a real wholesaler despite what Graeme Danks says. Mitre 10 will now be the only truly independent hardware marketer and wholesaler. So the time is now ideal to attract an equity investor to help this Australian organisation grow. Unless Mitre 10 can service the Danks customers independent hardware will be gone for good.

Nedlands, WA
WES' market cap fell $1.5 billion on the day of the WOW announcement: if truly related to WOW's announcement (vs ex-dividend change), it strikes me as a SILLY OVERREACTION! > As noted, WOW plans for their first store to open in 2011. WHAT'S THE NPV IMPACT TODAY OF 2011 EBIT BUNNINGS M-I-G-H-T LOSE TO A NEW ENTRANT? > Danks WHOLESALES to lots of small retailers (a la MITRE 10), but doesn't own that many (it is, however, a company, not a co-op) > Do you think BUNNINGS ever assumed they would never have a real competitor? (There once was Hardwarehouse, but WES was smart enough to acquire it!) Lowe's certainly brings some expertise, but it's a well-known fact that Bunnings absorbed a lot from Home Depot (without their active cooperation!)

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Total Shareholder Return as at 30/06/16

1 year TSR5 year TSR
383rdRio Tinto12%-1%
483rdWestpac-2%13%
497thTelstra-4%21%
513thCommonwealth Bank-7%14%
599thWoolworths-19%-1%
722 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Revenue

1st↑Woolworths$61,149.4m
2nd-Rio Tinto$49,225.3m
5th-Commonwealth Bank$27,005.0m
6th-Telstra$26,607.0m
7th↑Westpac$21,642.0m
77 listed non wa companies ranked by revenue.
Source: Morningstar

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