This article is from the Australian Property Journal archive
WOOLWORTHS has revealed the first of its Big W locations that will close down in the new year, after announcing in April that 30 of the struggling discount department chain’s stores and two distribution centres would be shuttered.
The group said it had “reached an agreement with landlords” to close Big W stores in Chullora, Auburn and Fairfield – all in Sydney – in January 2020. It has already announced the Monarto distribution centre in South Australia would cease operations at the end of its lease in FY2021, followed by the Warwick centre in Queensland in FY2023.
Woolworths expects to take a $370 million hit in its annual results due to the store closures, which represent 16% of its 183-store Big W network, with a remaining average lease tenure of around 10 years. The chain employs around 22,000 people.
Big W lost $110 million in the 2018 financial year is expected to post a loss between $80 million and $100 million before tax in over the 2019 financial year. Comparable sales growth in the March quarter was around 6% for the chain, but came in below target figures and the business has been lagging in the tough retail conditions for some time.
“These are not decisions we take lightly and we regret the impact the closures will have on affected team members,” David Walker, Big W managing director said.
“Big W will continue to work with landlords over the coming months as part of the network review and remain committed to building a strong and sustainable BIG W that meets the needs of Australian families.”
The Auburn store will leave 7,159 sqm of empty space within Elanor Retail Property Fund’s Auburn Central neighbourhood shopping centre, four and a half years before the expiry of its current lease.
Big W’s withdrawal has triggered a near-$21 million repositioning of the centre. In an announced the ASX yesterday, the fund framed the closure as a “positive catalyst for the transformation of Auburn Central into a Sydney metropolitan, dual supermarket, neighbourhood shopping centre”.
It said all expected rental downtime from the Big W vacancy would be adequately covered by Big W’s lease surrender payment.
“The balance of Auburn Central’s retail operations are expected to be unaffected and remain at 100% occupancy; and the repositioned DDS tenancy is expected to open fully occupied upon completion in late 2020.
“Heads of agreement has been executed with a key mini-major retailer to take a significant component of the available area.”
Auburn Central has just been independently valued at $101.5 million as at 30th June. The fund said the repositioning project is forecast to generate incremental net property income reflecting a yield of 10% on total development costs of $20.7 million.
“Well located shopping centres continue to provide opportunities to reposition retail floor space. We look forward to continuing to drive the transformation of Auburn Central into a strongly performing, non-discretionary focussed neighbourhood centre, to grow investment returns for ERF security holders,” fund manager, Michael Baliva said.
