Supercheap Auto feels the sting of Masters’ fire sale fallout: What a post-Masters landscape will look like

The $500 million liquidation sale at home improvement retailer Masters is squeezing the sales of retailers in the hardware and outdoor sector, according to some executives.

Yesterday Super Retail Group managing director Peter Birtles told shareholders widespread liquidation activity in the sector is affecting sales in the tools category of its Supercheap Auto business, but this will give way to growth in the new year.

“This negative impact is expected to continue until the end of the first half [of the financial year], but the changing competitive environment will present the opportunity for market share growth in the second half of the year,” he said.

Super Retail, which also holds sports goods store Rebel, Super Amart, Rays Outdoors and Boating Camping and Fishing (BCF), delivered a solid result across the portfolio as it works towards completing closures and refurbishments of Rays stores, although group sales were short of expectations. Like-for-like sales growth in the auto sector was up 2.5% for the quarter, and as Birtles references, the company sees an opportunity to grow market share later in the year. Masters stores are still slated to close on December 11.

There is now under seven weeks to go until the Masters hardware venture closes for good, other businesses are starting to examine the fallout – and opportunities – presented by the sale.

A post-Masters landscape

In August Bunnings managing director John Gillam expressed concern to analysts about the effects of Masters sale stock on the Bunnings hardware business. However, at the time experts told SmartCompany that while the sale might be a temporary draw for customers, ultimately Woolworths’ exit from the DIY sector would allow Bunnings easy entry into smaller markets, delivering another blow to the last surviving independent hardware stores. Bunnings will release its own sales figures for the first quarter of this financial year on Wednesday.

In August managing director of independent hardware operator J.C. Dahlsen, John Dahlsen, told SmartCompany that it was difficult to predict the fallout of the fire sale, but that Bunnings should be worried in the short term.

However, Dahlsen also observed last year in an open letter to the Prime Minister that the end of the Masters business would give Bunnings a chance to show its exceptional marketing power, to the detriment of smaller operators.

“The Bunnings operations team is very strong and effective, if not brutal, in driving performance,” he wrote.

Earlier this month Beacon Lighting also shouted out in pain over price slashing of lighting stock at Masters, which saw a 15% slump in sales for the brand. At the same time, however, Beacon said it was potentially considering taking up real estate in the planned homemaker centre setups that Home Consortium, buyer of the Masters warehouse sites, was planning.

Read more: Shoppers complain of “absolutely disgusting” customer service at Masters fire sale

Supercheap Auto has been floated as a name that is also potentially interested in grabbing floor space at Masters locations once the sites become vacant. The likes of The Good Guys and Harvey Norman have also been suggested, with retail analysts telling SmartCompany there is still space for big barn retail in Australia, provided companies determine their return on equity for the space first.

“Big box retailing is predicated on home improvement,” chief executive of the Retail Doctor Group, Brian Walker, said earlier in October.

“Each Masters site has to be evaluated on its own merits.”

With the website down and phones switched off at Masters sites, customers now must go into stores to net the final bargains on offer. The “going out of business” sale is being controlled by GA Australia, which in August said it would liquidate stock from 63 stores over several weeks “before all of the merchandise is sold in all locations”, according to a statement.