Bunnings v Metcash: Tradie tool wars heat up with $60 million investment
Metcash has paid $60 million to up its stake in Total Tools. Photo: Total Tools
Australia’s tradie tool war is heating up with Mitre-10 owner Metcash announcing a $60 million plan to lift its stake in Total Tools on Monday.
Just weeks after rival Bunnings unveiled plans to launch a new network of trades-focused hardware outlets under a new brand, Metcash told its investors that Total Tools will undergo its own ambitious expansion plan.
Metcash will own 85 per cent of Total Tools, less than a year after buying its initial 70 per cent stake for $57 million. It has the option to buy the entire business within the next three years.
It will also lend another $25 million to Total Tools to fund an expansion of its store network, which is currently 90 nationwide.
“Total Tools [TTH] has significant growth opportunities and this increase … is expected to help TTH’s growth plan,” Metcash said on Monday.
The deal comes less than a month after Bunnings unveiled a plan to use the Adelaide Tools business, which it bought in 2020, as the foundation for a new professional tools chain that will focus on the trades market.
Bunnings, which has yet to decide the name of its new chain, is worried trades people have snubbed its hardware brand and plans to use a new moniker to win a bigger slice of the lucrative professional market.
“We’re always interested in categories where we aren’t able to service customers effectively through the Bunnings format,” Bunnings boss Michael Schneider said earlier in June.
Bunnings, which also has more than 260 of its famous green sheds across Australia, wants to open 75 shops under its new brand within in a few years.
There are also currently only six Adelaide Tools stores, all in South Australia.
To combat Bunnings, Metcash wants to open up to 10 Total Tools stores every year until 2025, giving it 130 locations.
Metcash already has about 650 hardware stores across Australia, most under the Mitre-10 and Home Timber & Hardware brands.
About half of the new Total Tools stores will be joint ventures between Metcash and Total Tools. The remainder will be owned by Metcash.
Metcash is also upgrading the existing Total Tools store network, with 24 renovations already complete.
Also on Monday, Metcash unveiled its financial results for the year to April 30.
Group revenue was up 9.9 per cent to $14.3 billion, thanks to strong performances in the IGA supermarket network, which is operated largely by independent owners.
Net profit after tax was $239 million, much improved on the $56.8 million loss the company booked in 2020.
Earnings for its hardware business soared 61.5 per cent to $136 million thanks to a spike in DIY activity during COVID-19 lockdowns in 2020.
“Pleasingly, the group has continued to benefit from a shift in consumer behaviour in the first eight weeks of the new financial year,” Metcash boss Jeff Adams said on Monday.
“Supermarkets, Liquor and Hardware [are] up 14.2 per cent, 26 per cent and 29.1 per cent; respectively.”