Australian retailer Woolworths Group is to close 30 of its Big W stores as part of a network review aimed at returning the business to profitability.
Woolworths operates 183 Big W stores in Australia, selling clothing, electricals and camping gear. In its 2018 financial year, the division posted an AU$110m (US$78.3m) loss, weighing on the wider group’s profits.
Big W comparable sales growth in the third quarter (12 weeks non-Easter-adjusted) was approximately 6%, which the group said was underpinned by strong transaction growth. However, the profit improvement is “slower than planned” and Big W is expected to report a loss before interest and tax in fiscal 2019 of AU$80-$100m.
Woolworths Group said the cost of exiting the sites will result in a P&L charge of around $270m mainly related to lease and other store exit costs. It will also close two distribution centres related to the business.
Potential store closures represent around 16% of the current store network, with a remaining average lease tenure of approximately 10 years. To gain cost efficiencies and improve stock availability, Woolworths Group said Big W’s supply chain will move closer to stores.
“As foreshadowed at our half year 2019 results, while the recovery in trading for Big W is encouraging and there remains further opportunity for improvement, the speed of conversion to earnings improvement is taking longer than planned,” said Brad Banducci, Woolworths Group CEO. “We…will endeavour to provide affected team members with alternative employment options within the Woolworths Group where possible.
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By GlobalData“This decision will lead to a more robust and sustainable store and DC network that better reflects the rapidly changing retail environment. It will accelerate our turnaround plan through a more profitable store network, simplifying current business processes, improving stock flow and lowering inventory.”
