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1000 jobs, 170 Target stores to disappear in major restructure

Business

Wesfarmers has announced a massive restructuring which will mean the closure of about 70 Target stores and the conversion of about 90 others to Kmart with impairment costs of up to $480 million.

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As many as 1000 jobs could be lost in the process and another $120 million to $140 million will be recognised in costs.

The decision follows a review of its struggling Target business, which the company said was unsustainable.

It also said it was continuing its assessment of strategic options for a commercially viable Target and its remaining store network.

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.

Wesfarmers would also continue to look at options for a commercially viable Target and its remaining store network, including further optimisation of the store network and changes to the operating model.

“For some time now, the retail sector has seen significant structural change and disruption and we expect this trend to continue,” Scott said.

“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.

“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.”

Its 2020 bottom line will also be hit a $300 million hit to its Industrial and Safety division primarily relating to the impairment of goodwill but it will gain $290 million from the sale of a 10 per cent stake in Coles plus another one-off pre-tax gain of $221 million on the revaluation of the remaining Coles investment.

Affected staff will be offered transfers from Target to Kmart stores and it said there would be a significant reduction in the number of its Target store support staff.

It anticipates the action will be carried out during the next 12 months and said the conversion of suitable stores to Kmart would address gaps in the Kmart network and was expected to result in an improved financial performance for the Kmart Group while meeting the group’s return on capital hurdles.

Kmart Group would also continue its investment in its digital channels.

Kmart Group managing director Ian Bailey said that the decision to significantly reduce the Target store network was necessary.

“Leveraging the strengths of the Kmart Group, we have made a significant effort to avoid store closures, retain our valued team members, keep serving our customers and supporting our suppliers.

“We continue to believe that Target has a future as a leading retail brand in Australia and is much loved by many customers, but a number of actions and changes are required to ensure it is fit for purpose in a competitive, challenging and dynamic market, including a smaller number of stores and a stronger online business.”

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