Retail heavyweight Woolworths is abandoning its multi-billion dollar foray into the Australian home improvement market following years of losses, putting 7000 jobs at risk.
The company is looking to either sell or wind up its struggling home improvement arm, which includes the Masters home improvement and Home Timber & Hardware chains.
Chairman Gordon Cairns said a recent review indicated that it will take a considerable number of years for Masters to become profitable.
“We as a board have determined that we can not sustain, or continue to sustain these losses,” Mr Cairns told analysts on a conference call on Monday.
Investors were relieved, with Woolworths shares defying widespread falls on the stock market to climb $1.18, or 5.2 per cent, to $23.84 by 1146 AEDT.
Mr Cairns said the decision will allow Woolworths to focus on strengthening its core businesses, including its supermarket chain which is battling competition from rivals Coles and Aldi.
Before Woolworths can exit its home improvement business it must take full control of Masters.
Woolworths plans to buy out its home improvement joint venture partner, the US-based Lowe’s, which currently holds a 33.3 per cent stake in the business.
It will take at least two months to resolve the ownership of Masters, with both companies set to appoint independent advisers, Mr Cairns said. The business will continue to trade through the period.
“Our top priority is to do the right thing by our shareholders, employees, suppliers, customers, and we will act quickly and openly to minimise the impact of this decision,” he said.
“Our aim is to provide all of these stakeholders as much certainly as we can over the future, and as soon as we can.”
In the meantime Woolworths will review the value of its 66.7 per cent stake in the home improvement business, which has been under intense pressure from rival Bunnings.
Woolworths’ decision comes as staunch rival, Wesfarmers, pushes ahead with the international expansion of Bunnings.
Wesfarmers has agreed to buy 265 Homebase stores for STG340 million ($A705 million) from Home Retail in the UK, with plans to rebrand the chain, Bunnings.
In October, Woolworths reported that Masters had enjoyed a 23.5 per cent rise in quarterly revenue after slowing down the pace of store openings and focusing on a revamp of the brand.
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