Woolworths Group has announced that it will close 30 Big W stores across its national network, following a review of the struggling discount department store chain.
In a statement to the ASX on Monday, the retail group said that it had earmarked “approximately 30 Big W stores for closure over the next three years”, representing around 16 per cent stores across its entire national network.
Two distribution centres will also be shut down under the restructure. All of the closures are due to take place at the end of their respective leases.
Woolworths said that it would not disclose which stores are set to close “due to ongoing discussions with landlords”.
The distribution centres at Monarto in South Australia and Warwick in Queensland will be shut down in the 2021 and 2023 financial years, respectively, as part of a strategy to move Big W’s supply chain closer to its stores in a bid to deliver cost efficiencies and boost availability of stock.
“The cost of exiting these sites will result in a P&L charge of approximately $270 million mainly related to lease and other store exit costs,” the company said.
The review also noted non-cash asset impairments of around $100 million, which it said was “a more conservative level of margin recovery expected from Big W”.
Woolworths Group CEO said the turnaround in trading conditions for Big W had been “encouraging”, with further scope for improvement.
However, he said that “the speed of conversion to earnings improvement is taking longer than planned”.
“We understand the impact that the store and DC [distribution centre] closures will have on our team and will endeavour to provide affected team members with alternative employment options within the Woolworths Group where possible,” he said.
“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.”
Big W is expected to post a pre-tax loss for the current financial year of between $80 million and $100 million. That follows a loss of $110 million last financial year.
Woolworths Group noted that the retailer has been hit by the same factors currently impacting the broader retail sector, including rents outstripping inflation and falling foot traffic as customers shift to online shopping.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
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