Target set for shake-up
WESFARMERS has outlined plans to halve Target’s 284store network and slash jobs after a review found financial performance unsustainable at the troubled Target business.
The Perth-based conglomerate announced writedowns and costs of nearly $1 billion in its full-year accounts.
The firm said it would convert 10 to 40 Target stores and 52 Country Target stores in regional areas to Kmart stores. It will also close 10 to 25 largeformat stores and 50 smallformat Target Country stores.
In all, between 122 and 167 locations will either be converted or shut, accompanied by a significant reduction in Target’s store support office.
As a result, Wesfarmers will take a pre-tax charge of $430 million to $480 million on its Kmart Group business, which includes an impairment of the Target brand.
It will also incur $120 million to $170 million in restructuring costs and provisions in Kmart Group.
Kmart will also incur costs of $120 million to $140 million relating to the conversion of stores and stock clearance in the next financial year.
“The actions announced rebusiness flect our continued focus on investing in Kmart, a business with a compelling customer offer and competitive advantages, while also improving the viability of Target by addressing some of its structural challenges by simplifying the model,” Wesfarmers chief executive Rob Scott said.
The restructuring is expected to happen over the next 12 months with the majority occurring in calendar year 2021.
Kmart managing director Ian Bailey said staff in Target stores being converted would be employed by Kmart, while those in stores being shut would be considered for new roles across the wider group, including in Bunnings and Officeworks. The company said it still expected a reduction of 1000 to 1300 roles.
The group is also focusing on increasing digital offerings by Target and Kmart.
Wesfarmers had announced the review in April after slowing momentum at its department retail offerings Kmart and Target.
Wesfarmers yesterday also outlined non-cash impairment of $300 million in its Industrial and Safety division following the drop in economic conditions since the first-half results.
It will recognise a $290 million gain on its sale of 10 per cent interest in Coles and oneoff pre-tax gain of $221 million on revaluation of the remaining Coles investment.
At the close yesterday, Wesfarmers shares had dipped 0.051 per cent to $38.86.
THE ACTIONS ANNOUNCED REFLECT OUR CONTINUED FOCUS ON INVESTING IN KMART … WHILE ALSO IMPROVING THE VIABILITY OF TARGET
ROB SCOTT, WESFARMERS