Kmart Group has identified a number of actions to accelerate the growth of Kmart and address the unsustainable financial performance of Target, announcing stores will close or convert to KMart.
In total, between 122 and 167 locations will either be converted or shut, or around half of Target's 284-strong store network.
These actions include the conversion of suitable Target and Target Country stores to Kmart stores, the closure of between 10 to 25 large format Target stores, the closure of the remaining 50 small format Target Country stores, and a significant restructuring of the Target store support office.
Wesfarmers is continuing its assessment of strategic options for a commercially viable Target and its remaining store network.
Wesfarmers Managing Director Rob Scott said that these actions and further investment in Kmart will enhance the overall position of the Kmart Group, while also improving the commercial viability of Target.
“For some time now, the retail sector has seen significant structural change and disruption, and we expect this trend to continue. With the exception of Target, Wesfarmers’ retail businesses are well-positioned to respond to the changes in consumer behaviour and competition associated with this disruption,” Mr Scott said. “The actions announced 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 by addressing some of its structural challenges by simplifying the business model.
Changes include;
- The conversion of between 10 to 40 large format stores to Kmart, subject to landlord support
- The conversion of approximately 52 Target Country stores to small format Kmart stores
- The closure of between 10 to 25 large format Target stores and the closure of the remaining 50 Target Country stores which are not suitable for conversion to Kmart
- A significant reduction in the size of the Target store support office
- Ongoing negotiations with landlords to support the transition to a sustainable store network
These actions are expected to be implemented over the next twelve months with the majority occurring in calendar year 2021. The conversion of suitable stores to Kmart will address gaps in the Kmart network and is expected to result in an improved financial performance for the Kmart Group while meeting the Group’s return on capital hurdles.
The conversion of suitable Target Country stores to small format ‘Kmart Hub’ stores will leverage Kmart Group’s learnings from trialling small format Anko stores in the United States while providing regional customers with increased access to a selected range of Kmart’s home, apparel and general merchandise products.
In line with continued strong growth in online sales and the increasing number of customers who prefer to shop online, Kmart Group will continue its investment in its digital channels. Through an expanded click and collect offering, the full range of Kmart, Target and Catch products will be available at all stores across the Kmart Group, including ‘Kmart Hub’ stores.
The Group is continuing its assessment of strategic options for a commercially viable Target and its remaining store network, including further optimisation of the store network and changes to the operating model. An update on this assessment will be provided at the Group’s full-year results in August 2020.
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