Between 10 and 40 underperforming large format Target stores are set to be converted into Kmarts in an effort to turn around the financial performance of Kmart Group, Wesfarmers announced on Friday.
Additionally, approximately 52 Target Country stores will be converted, and between 10 and 25 Target stores, as well as the remaining 50 small format Target locations, will be closed.
According to Wesfarmers managing director Rob Scott the store closures will be complemented by an investment in Kmart Groups digital offerings, with the goal of offering Kmart, Target and Catch marketplace products via home delivery or click and collect.
“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 consumers behaviour and competition associated with this disruption.”
These changes will be implemented over the next year, with the majority occurring in calendar year 2021, according to Wesfarmers.
All team members at stores being converted will be offered roles at the new Kmart stores, and employees at stores to be shuttered may be presented with opportunities across Wesfarmers’ staple of businesses – including Catch, Officeworks and Bunnings.
Kmart Group managing director Ian Bailey said Target continues to have a future in Australia, albeit in a smaller capacity.
“Leveraging the strengths of the Kmart Group, we have made a significant effort to avoid store closures, retail our valued team members, keep serving our customers and support our suppliers,” Bailey said.
“Unfortunately, the disruptive and competitive nature of the retail sector requires us to make some difficult decisions to ensure we have a viable Target business into the future, while continuing the strong growth of Kmart and Catch.”
Thee changes are expected to cause a number of impairments on Wesfarmers 2020 full-year results amounting to between $120 and $170 million before tax in store closures; a $430 to $480 non-cash impairment in Kmart Group related to the decline of the Target name and business; and a $300 million non-cash impairment in Wesfarmers’ industrial and safety division.