Department store chain Big W will close approximately 30 stores and two distribution centres over the next three years in an effort to create a more profitable and sustainable store network in a changing retail environment.
This is less than the 60 store closures that Macquarie Wealth Management predicted in a report last month, before Big W’s parent company Woolworths Group had completed its internal review of the discount department store business.
The decision, which will see the number of Big W stores shrink by about 16 per cent, will cost the business $270 million in lease and store exit costs. This will impact Woolworths Group’s FY19 full-year result, alongside a $100 million cash impairment identified in the review.
“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,” Woolworths Group chief executive Brad Banducci said in a note to investors.
“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 stockflow and lowering inventory.”
In its report last month, Macquarie noted that half of Big W’s stores are located in challenging centres, many of which are regional, and that these locations are unlikely to give the brand the sales it needs to return to profitability.
Woolworths expects its department store business to record a loss before interest and tax for FY19 of $80 to $100 million, slightly below the $110 million loss felt in FY18.