Australia's Wesfarmers to shut or rebrand over 100 Target stores in virus slump

Australia's Wesfarmers to shut or rebrand over 100 Target stores in virus slump

Australian retail giant Wesfarmers Ltd said it will close or rebrand nearly two-thirds of its Target department stores and take one-off charges totalling up to AUS$650 million (US$426 million) as it reels from the coronavirus fallout.

A newly constructed Target store is shown in San Diego, California
FILE PHOTO: A newly constructed Target store is shown in San Diego, California May 17, 2016. REUTERS/Mike Blake/File Photo

SYDNEY: Australian retail giant Wesfarmers Ltd said it will close or rebrand nearly two-thirds of its Target department stores and take one-off charges totalling up to AUS$650 million (US$426 million) as it reels from the coronavirus fallout.

The move strikes a blow to what was once among Australia's most durable retail brands and reflects the urgency of brick-and-mortar stores around the world to adapt as sweeping virus-related curbs on movement keep shoppers at home.

With 284 stores nationwide, Target is the country's largest department store network but its owner fast-tracked a review of operations in April after the shutdown intended to contain the virus accelerated a sales slump.

Wesfarmers said it will convert up to 92 Target stores to its low-cost Kmart department store chain, and shut up to another 75 Targets, leaving as few as 117 Target outlets.

The retailer will see an impairment charge of up to AUS$480 million to reflect a lower value of the Target brand and other assets, plus AUS$170 million, before tax, in inventory write-offs and other restructuring costs for the year ending June.

"The actions ... 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," Wesfarmers Managing Director Rob Scott said in a statement on Friday.

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

Target's problems were worsened by COVID-19 but began before the health crisis. In the six months to December, Target's sales dropped sharply as it lost business to low-cost rivals like Amazon.com Inc and Kmart.

Wesfarmers' Target is not related to the U.S. chain Target Corp .

Wesfarmers shares were flat on Friday, versus a broader market decline of 0.7per cent.

(Reporting by Byron Kaye in SYDNEY and Shruti Sonal in BENGALURU; Editing by Chris Reese and Himani Sarkar)

Source: Reuters

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