It wasn't the best start for Rob Scott, the incoming CEO of Wesfarmers Ltd (ASX: WES), with the company's United Kingdom expansion proving to be the elephant in the room at its AGM.
While Wesfarmers' expansion of Bunnings into the UK through its purchase of Homebase has weighed heavily on the minds of some shareholders, it was a subject that was almost brushed over at the conglomerate's AGM.
And when it did come time to address the Bunnings problem, Mr Scott announced that Bunnings United Kingdom & Ireland was delivering "good sales growth".
But he was also forced to tell shareholders things will get worse before they start to get better.
"Losses are however expected to increase in the 2018 financial year as trading remains challenging for Homebase and as we progress the conversion from Homebase to Bunnings," Mr Scott said.
On the point of Bunnings delivering good "sales growth", it is difficult to see Mr Scott's rationale behind the statement based on the company's financial year (FY) 2018 first quarter sales results, released last month.
According to Wesfarmers, sales for Bunnings United Kingdom & Ireland dropped from $554 million in FY 2017 to $457 million for FY 2018, representing a decline of 17.5%.
And the question shareholders would be asking is: how much worse can it get?
Wesfarmers previously reported a loss of $89 million in FY 2017 for Bunnings UK, $90 million down from the $1 million profit it reported in FY 2016.
However, Mr Scott offered shareholders hope in regards to the Bunnings problem.
"Our focus is on strengthening the management team to support the transformation and instilling stronger execution across the business," Mr Scott said.
"The establishment of Bunnings in the UK will take time and we will be disciplined with how we invest further capital."
But those statements could generate greater cause for concern rather than alleviating shareholders' worries.
Does that mean Wesfarmers had put an inadequate management in place in Bunnings UK?
And, perhaps more troubling: has Wesfarmers been throwing money around willy-nilly?
Still, Wesfarmers is a strong business with a strong history.
It faces some challenges ahead, but perhaps all the noise around Bunnings and Coles, recently outperformed by Woolworths Limited (ASX: WOW), will provide investors with an opportunity.
