The news sent Wesfarmers’ plunging 4.5 per to close at $42.34 - the biggest one day fall since October 2016, and the second biggest one-day drop in eight and a half years. “I appreciate what we’ve disclosed today is terrible news, terrible news for shareholders," Mr Scott said. He said that "all options" - including an exit - were on the table. However an exit was not the preferred option and it would have been premature to make that decision before the review. "To shut the door on this today would be incredibly damaging to shareholders, particularly where the current level of losses are," Mr Scott said. “This business was profitable two years ago, so we know that there is the capacity within this network when things are working to generate profitability."

In the meantime BUKI would try to improve sales at the remaining 231 Homebase stores. Sales have suffered as Wesfarmers management alienated customers by removing important product categories and concession stores, and moving some to the Bunnings format. Loading Mr Scott said Wesfarmers had earmarked between 20 and 40 of the worst performing Homebase stores for possible closure. The first 19 "pilot" Bunnings stores had seen some encouraging results, Wesfarmers said, but sales had suffered during the winter months when it did not have the right products. It was still searching for a "proof of concept" for the Bunnings format.

Five more Homebase stores are currently being turned into Bunnings, but Wesfarmers will not start any more conversions until the review is completed in June. Citi analyst Bryan Raymond said the market had a "firming expectation that the new senior management team will announce an exit from Bunnings UK over the next twelve months". The write-down consists of a $795 million non-cash impairment against goodwill recognised on the Homebase purchase and the book value of the Homebase brand; a $66 million writedown of stock that was oversupplied or unsuitable; store closure provisions of $70 million; and a $92 million write down of deferred tax assets. Wesfarmers said it expected BUKI to report an underlying loss before interest and tax of $165 million for the first half of the 2018 financial year. That is almost double the $89 million loss it racked up for the entire 2017 financial year, and more than three times the $48 million loss from the 2017 first half.

Wesfarmers also announced that BUKI’s managing director, Peter Davis, who has been on leave since last month, was retiring after 25 years with the Bunnings business, to be replaced by Damian McGloughlin. I appreciate what we’ve disclosed today is terrible news, terrible news for shareholders Wesfarmers chief executive Rob Scott With Mr Davis' exit, the three architects of the BUKI investment have left Wesfarmers: former Bunnings boss John Gillam resigned in December 2016, and former managing director Richard Goyder made way for Mr Scott in Novemeber. Missed Target Wesfarmers also said there had been lower than expected sales at Target, and as a result it would record a non-cash impairment of $306 million against the value of the discount department store.

Despite the weaker sales, Target was expected to report earnings before interest and tax of $33 million for the first half - up 13.8 per cent from the same period last year. The first Bunnings store in Britain Credit:Neil Craven Wesfarmers has combined its Kmart and Target brands into the one division, which would achieve earnings of about $415 million for the half - the highest combined first-half earnings since 2010, Wesfarmers said. UBS analyst Ben Gilbert said he now forecast BUKI to break even in 2022, not 2020 as previously expected, and that it would run up total losses of $384 million before then. But even that "could prove optimistic given the current trading and loss of key management", he said.