RESTRUCTURE TO COST WOOLWORTHS $1 BILLION

Written on the 25 July 2016 by James Perkins

RESTRUCTURE TO COST WOOLWORTHS $1 BILLION WOOLWORTHS (ASX:WOW) will take a $959 million impairment in FY16 as the company undertakes a restructure and closes underperforming and unprofitable stores.

CEO Brad Banducci, who has been in the role since February, outlined his plan to restructure the business in a statement this morning. It includes cutting 500 jobs from the support office and supply chain, and moving another 1,000 from the group office into the business.

EziBuy has been separated from Big W in a restructure of the General Merchandise business. The company has written $309 million off the value of Ezibuy, which it bought for $306 million in 2013 and will now look to sell. Big W has taken a hit of $151 million.

The company will also slow its new supermarket rollout and will close a total of 64 stores at a cost of $344 million.

"Today's announcement demonstrates both the progress we are making and our absolute commitment to act quickly to rebuild the business by doing the right thing by our customers, shareholders, team and suppliers," says Banducci.

Listing some positives, Banducci says the business has achieved record Voice of the Customer scores, has improving team engagement scores and is achieving continued transaction growth.

As part of the new operating model, sales per square metre and "return on funds employed" will be used as long-term performance indicators.

FY'16 EBIT will be $2.55-2.57 billion.

"While we have had to make some tough decisions and this has ramifications for many of our team, we are confident we are putting in place solid foundations for the future and early results give us confidence we are on the right track.

This will be a three to five-year journey and we are determined to drive sustainable improvements in sales per square metre and Return on Funds Employed to deliver value for shareholders," says Banducci.

WOW is trading steady this morning at $22.45 per share.

It has been a tough few years for Woolworths, following the failure of its Masters business and now EziBuy, in addition to the increased competition from new players, such as Aldi.

WOW has fallen away from its main competitor, Wesfarmers (ASX:WES) in market value in the past two years. WOW hit a five-year peak of $37.74 in April, 2014, while WES has consistently traded around $40 since that time and is today selling for $41.80 per share.

Author: James Perkins Connect via: Twitter LinkedIn

Latest News

THE STAR'S STUNNING ANSWER TO CROWN'S BARANGAROO

THE Star Entertainment Group (ASX:SGR), not to be outdone by James Packer's Barangaroo development across the ...

BRISBANE COAL TERMINAL REOPENS AFTER SHIPLOADER REPAIR

COAL loading has recommenced at New Hope's (ASX: NHC) Brisbane terminal today after repairs to its ship loader, w...

SUPERYACHTS OFFER UNTAPPED POTENTIAL AT COMMONWEALTH GAMES

SUPERYACHT Australia has devised a strategy to attract more superyachts to Queensland and capitalise on revenue op...

GDP FIGURES A 'WAKEUP CALL' FOR PARLIAMENT

THE GDP figures are an end-of-year wakeup call for Parliament about what lies ahead for the country, according to ...

Related News

HOW MCDONALD'S AUSTRALIA REDISCOVERED ITS INNOVATIVE SPIRIT

MCDONALD'S is such a ubiquitous part of the Australian landscape today that it is easy to forget how it change...

JB HI-FI IS THE GOOD GUY IN $870 MILLION ACQUISITION

ELECTRONICS giant JB Hi-Fi has formally completed its $870 million acquisition of home appliance chain The Good Gu...

ACCC ACTS AGAINST MERITON'S RIGGED REVIEWS

MERITON Property Services is under fire from Australia's main consumer watchdog, after it allegedly engaged in mi...

ACCC FIRES WARNING SHOT TO IVF PROVIDERS

IVF clinics have been put on notice by consumer watchdog, the Australian Competition and Consumer Commission (ACCC...

Contact us

Email News Update Sign Up Contact Details

Subscribe to our mailing list

* indicates required
Email Format

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter