Wesfarmers Is Converting Target Stores To Kmart Ones

Cornelia Mascio
Mag 23, 2020

Wesfarmers notified the markets of restructuring costs and provisions totalling approximately $120 to $170 million before tax, primarily reflecting Target store closure costs, inventory write-offs and a restructure of the Target store support back office.

An update to the Australian Securities Exchange this morning confirmed that Wesfarmers sees a dim future ahead for Target, with Wesfarmers managing director Rob Scott singling out Target as the weakest brand in its portfolio.

Between 10 and 40 large Target stores and 52 of the 100 smaller Target Country outlets are to be converted to Kmarts.

"The conversion of suitable stores to Kmart will address gaps in the Kmart network and is expected to result in an improved financial performance for the Kmart Group while meeting the Group's return on capital hurdles", Wesfarmers said in a statement.

The company said there were would be "redeployment opportunities in Kmart and other Wesfarmers businesses" to "minimise the effect of these changes on Target team members". Closures will impact as many as 25 large-format Targets, and 50 Target Country stores.

"Over the last two months, Bunnings and Officeworks have experienced significant demand growth as customers and their families spent more time working, learning and relaxing at home", Wesfarmers said at the time. The Wesfarmers release noted that "Kmart Group will continue its investment in its digital channels". "Unfortunately, the disruptive and competitive nature of the retail sector requires us to make some hard decisions to ensure we have a viable Target business into the future, while continuing the strong growth of Kmart and Catch". Those affected by store closures will be considered for new roles at Kmart and Catch.

Managing director Rob Scott told 7NEWS Kmart was the more profitable of the two stores, so it was made a decision to shift the focus away from Target.

"Redeployment opportunities in Kmart and other Wesfarmers businesses will minimise the effect of these changes on Target team members", the company said in a statement.

Kmart Group managing director, Ian Bailey, said the decision was not easy.

More than 100 Target stores across Australia could be axed or rebranded as Kmart in a major revamp of the struggling chain.

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