Building Depot staff face uncertainty

By NZPA

Friday 15th November 2002

Fletcher Building is reviewing the future of its Building Depot stores as competition in the hardware industry heats up.

The company was not losing money but its level of profitability was unacceptable, said David Worley, the head of distribution for both Building Depot and rival Placemakers.

"We're working through a variety of options that we have, in terms of how we structure our business, I guess how we overall manage the business."

Both companies are owned by Fletcher Building. At its annual meeting this week, managing director Ralph Waters said Placemakers was doing well and the 10 Depot stores had lifted sales by 16 percent, but the Depot's earnings were not profitable enough.

Mr Worley confirmed inventory and "inadequate systems" had been part of the chain's problems. As a result, ordering and other support functions were now being handled by Placemakers, resulting in about 10 management job losses.

The Depot's most profitable store in New Lynn would also eventually be converted to a Placemakers store.

But there was no chance the whole chain would be rebranded under Placemakers, he said.

About 250 staff work for the Building Depot at five stores in Auckland, and one each in Wellington, Tauranga, Hamilton, Palmerston North and Christchurch.

The company's website says founder Wendell Philips, established the first store at New Lynn eight years ago, inspired by the Warehouse and the world's biggest hardware retailer, the Home Depot.

Its philosophy was to not only match rival's prices but beat them by 15 percent.

Mr Worley said the company's discount approach had not been a factor in its current situation, and there was no deadline for turning the company around.

"We're not imposing some artificial deadline. We're taking sensible commercial steps to improve the performance of what is a useful business for us, not one that's costing us but not one that's providing strong enough return."

Competition in the hardware sector is hotting up, with Australia's largest hardware company Bunnings announcing $35 million expansion plans here.

Bunnings has already bought the Hardwarehouse business in Auckland and 32 Benchmark stores, and plans to open two "super stores" in Hamilton and Christchurch by the middle of next year.

The stores would be the largest hardware stores in New Zealand, and employ 100 staff each.

Mr Worley said the arrival of Bunnings was not a factor in the Building Depot review, and Mr Waters said this week that Placemakers was unlikely to be affected.

Placemakers and Bunnings did not compete head to head, with 80 percent of Placemakers business aimed at the building trade while 80 percent of Bunnings was to retail, he said.

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