Wesfarmers has outlined plans to halve Target’s 284-store network and slash jobs after a review found financial performance unsustainable at the troubled Target business.
The Perth-based conglomerate also announced writedowns and costs of nearly $1 billion in its full year accounts.
The company says it will convert 10 to 40 Target stores and 52 Country Target stores in regional areas to Kmart stores. It will also close 10 to 25 large format stores and 50 small format 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, it will take a pre-tax charge of between $430 million and $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 reflect our continued focus on investing in Kmart, a business with a compelling customer offer and strong competitive advantages, while also improving the viability of Target by addressing some of its structural challenges by simplifying the business model,” Wesfarmers chief executive Rob Scott said.
The restructuring is expected to be implemented over the next twelve 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 told reporters it still expects a reduction of 1,000 to 1,300 roles.
The group is continuing its assessment of strategic options for a commercially viable Target and its remaining store network.
It is also focusing on increasing digital offerings by both Target and Kmart.
Wesfarmers had announced the review in April after slowing momentum at its department retail offerings Kmart and Target.
Sales growth, particularly at Target had deteriorated as customer footfalls dropped in shopping centres and discretionary categories weaken due to social restrictions imposed to curb the spread of coronavirus, it had said.
Wesfarmers on Friday also outlined non-cash impairment of $300 million in its Industrial and Safety division following the deterioration 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 one-off pre-tax gain of $221 million on revaluation of the remaining Coles investment.
By 1325 AEST, Wesfarmers shares were up 5 cents or 0.1 per cent at $38.93 amid a weak Australian market.