Industry News
Woolworths Group To Close BIG W Stores
Woolworths Group has identified approximately 30 BIG W stores for closure over the next three years and two distribution centres (DCs) that will close at the end of their leases. 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 review also identified approximately $100 million of non-cash asset impairments reflecting a more conservative level of margin recovery expected from BIG W, taking account of both current trading and the outlook for the broader sector, including the continued customer shift to online. Together, the one-off pre-tax charge of approximately $370 million is currently expected to be recorded as a significant item in the financial year 2019 result. The cash cost is expected to be approximately $250 million, with the majority of the cash outflow from store exits expected in financial year 2021 and 2022.
Brad Banducci, Woolworths Group CEO said: “As foreshadowed at our half year 2019 results, while the recovery in trading for BIG W is encouraging and there remains further opportunity for improvement, the speed of conversion to earnings improvement is taking longer than planned. We understand the impact that the store and DC closures will have on our team and will endeavour to provide affected team members with alternative employment options within the Woolworths Group where possible.
“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,” he said.
BIG W comparable sales growth in Q3’19 (12 weeks non Easter-adjusted) was approximately 6% and was underpinned by strong transaction growth. Despite this, the profit improvement is slower than planned with BIG W currently expected to report a loss before interest and tax in financial year 2019 of $80-$100 million (financial year 2018: loss of $110 million).
The review was undertaken to help BIG W maintain a strong and profitable store network where all stores can make a strong contribution to BIG W’s profit over the longer term. Potential store closures represent approximately 16% of the current store network with a remaining average lease tenure of approximately 10 years. To gain cost efficiencies and improve stock availability, BIG W’s supply chain will move closer to stores. The two impacted DCs (Monarto, SA and Warwick, QLD) will therefore be closed in financial year 2021 and 2023 respectively.
Details of possible store closures will not be released due to ongoing discussions with landlords and in the interim, all stores and DCs will continue to trade as normal.
According to information eyesmart.com.au has obtained, all optical outlets of BIG W will be closed. There are currently 41 optical stores.
BIG W made also the following announcement on social media:
"To all our loyal BIG W customers: At our half year results in February, we announced we would be reviewing our store and distribution centre network. Today, we announced that we anticipate closing up to 30 BIG W stores within the next 3 gears. At this stage, we are unable to confirm which stores will close until we reach an agreement with the landlord. We have reviewed stores across Australia with no regional bias, despite recent media speculation. We have also made the decision not to renew the leases in two of our distribution centres, in Monarto (SA) expiring in 2021 and in Warwick (QLD) in 2023. While this decision has not been an easy one and we realise many of our teams and communities may be impacted, the intention of this review is to build a strong and profitable BIG W for the future. To confirm, BIG W is not closing down. We look forward to serving our valued customers when you are next in store or online."
