Woolworths Group is set to close 16 per cent of the Big W store network and two distribution centres after completing a network review of the retailer.
Over the next three years, 30 Big W stores will close – the locations of which have not been disclosed yet – while two distribution centres – in Monarto, South Australia and Warwick, Queensland – will cease operation at the end of their lease (F21 and F23 respectively).
The purpose of the review was to ensure that Big W maintains a strong and profitable store network, where all stores can significantly contribute to Big W's profit over the longer term.
To further improve costs efficiencies, Big W will move its supply chain closer to stores, which will also help improve stock availabilities.
Woolworths Group CEO, Brad Banducci, said that once the store closures are complete, the Big W business will be better equipped to adapt to the changing nature of retail.
“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 distribution centre 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 distribution centre 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.
The cost of exiting these sites will result in a profit and loss charge of $270 million, mostly relating to leases and other store exit costs. The review also identified roughly $100 million of non-cash asset impairments which reflects a more reserved level of margin recovery for the business. This one-off pre-tax charge of approximately $370 million will be recorded in the F19 result.
The announcement was made on 01 April.