This article is from the Australian Property Journal archive
WESFARMERS is shaking up its department store network, making the controversial decision to shut or convert 167 Target and Target Country stores across Australia to Kmart after phase one of its review of the struggling chain.
As many as 1,300 jobs may be lost in the restructuring, designed to “optimise the Target store network and reduce Target’s unsustainable cost base”.
Wesfarmers, which also owns Bunnings and Officeworks, has seen a resurgence in the popularity of its Kmart stores while the sister department store has struggled. Wesfarmers announced a strategic review of Target in April and had flagged ongoing store rationalisation last year.
Across the Target network, between 10 to 40 large format stores will be converted to Kmart and 52 Target Country stores to small format Kmart stores, while 10 to 25 large format Target stores will close, as will the remaining 50 Target Country stores that are not suitable for conversion to Kmart.
Ongoing negotiations with landlords will be undertaken to support the transition to a sustainable store network. There will also be a “significant reduction” in the size of the Target store support office.
These actions are expected to be implemented over the next 12 months with the majority occurring in the 2021 calendar year.
Wesfarmers’ controversial decision has attracted anger within the federal government. Deputy Nationals leader and Agriculture Minister David Littleproud called for shoppers to boycott the company.
“It just goes to show they don’t give a rat’s about us. If they want to turn their back on the most vulnerable, it just goes to show that corporate Australia has lost its way morally.
“Australians should vote with their wallets and not go near them,” Minister Littleproud.
Wesfarmers managing director Rob Scott said that these actions and further investment in Kmart will enhance the overall position of the Kmart Group, while also improving the commercial viability of Target.
“For some time now, the retail sector has seen significant structural change and disruption, and we expect this trend to continue. With the exception of Target, Wesfarmers’ retail businesses are well-positioned to respond to the changes in consumer behaviour and competition associated with this disruption,” Scott said.
Wesfarmers expects an improved financial performance for the Kmart Group as a result of the changes. It expects restructuring costs and provisions in Kmart Group of approximately $120 to $170 million before tax, non-cash impairment in Kmart Group of about $430 to $480 million before tax, including an impairment of the Target brand name.
A pre-tax gain on the sale of a 10.1% interest in Coles of $290 million is also expected, and a one-off pre-tax gain of $221 million on the revaluation of the remaining Coles investment. The group and Coles completed a demerger late in 2018.
Myer confirms reopening
Meanwhile, major department store confirmed on Friday it would reopen all remaining stores from Wednesday, aside from Karrinyup which will open on Saturday following the completion of refurbishments. Click and collect will be available at all stores.
Myer has reopened 24 stores on a staged trial basis over recent weeks.