A study commissioned by Woolworths (ASX:WOW) has found that hardware stores established by the Woolworths-Lowe's joint venture could generate $30 million a year in sales from a standard hardware outlet and slice the revenue of rivals Bunnings and Mitre 10 by up to 16 per cent.
The Australian supermarket chain used the economic impact report, prepared by consulting firm Urbis, in a failed attempt to gain approval for a 13,5000 square metre hardware, trade and nursery site in Geelong, which is the typical model for the 150 stores the joint venture plans to roll out across Australia.
A separate independent study found the store, which could have had a catchment of roughly 250,000 people, could pull in as much as $40 million in its first year of operation.
Woolworths and US giant Lowe's Companies Inc intend to invade the lucrative Australian home improvement market, with the first stores set to begin trading in the later half of 2011.
The two firms entered a joint venture to acquire hardware distributor Danks Holdings Ltd in 2009 in an effort to compete with market leader Bunnings, which is owned by Wesfarmers.
Through the joint venture, Woolworths aims to open 30 stores in Victoria within the next five years.
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