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The Big W discount chain of stores will close 30 stores in its national network over the next three years after a thorough review of the franchise.
The brand, owned by Woolworths, will also close two distribution centers (CD) and will result in a loss of $ 370 million from its annual results, the conglomerate told the Australian stock market on Monday morning.
The Company's loss of profit includes $ 270 million of lease and exit costs for the closure of approximately 16% of its department store network, plus $ 100 million of non-cash badet write-downs.
The closures affected 16% of the Big W franchise, which is significantly lower than expected in last month's Macquarie Wealth Management report that the brand is expected to close approximately 60 stores to ease the leasing commitment pressure of 2.9%. $ billions.
Woolworths general manager Brad Banducci said the review had been undertaken to help Big W become profitable in the long run.
"As indicated by our 2019 half-yearly results, as the resumption of Big W trading is encouraging and there is still room for improvement, the conversion rate into earnings improvement is taking more time than expected, "he said.
"We understand the impact that closures of stores and distribution centers will have on our team and we will strive to provide the members of the team involved with another job within the Woolworths group, as long as possible.
"This decision will result in a network of stores and a more robust and sustainable distribution network that better reflects the rapidly changing retail environment.
"This will accelerate our turnaround plan through a more profitable store network and the simplification of existing business processes, improved inventory flow and reduced inventory."
According to the Macquarie Report, Big W would be forced to close one-third of its 183 stores at a cost of about $ 759 million.
He stated that the final cost "would depend on the duration of the remaining lease on these problematic sites and whether the owner would accept a discount given the potential for alternative use, etc."
"The market could appreciate the removal of uncertain inconvenience given the sector's difficult prospects," he said.
Macquarie said half of the Big W stores were located in difficult geographic areas. "These sites are unlikely to allow Big W to regain the momentum necessary for profitability," he said.
"In a challenging retail environment, we are seeing a reduction in the number of stores as the most likely outcome of the review. Given the format of the Big W stores, we think it would be difficult to reduce the space as Myer does and that total store closures are more likely. "
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Originally published as Woolies to close 30 Big W stores
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