Big W Post $150m Loss, Sales Down, Restructure Yet To Kick In
Currently on life-support, whilst undergoing a major restructure, embattled retailer Big W has reported a staggering $150.5 million loss, a significant leap from the $14.9 million in losses reported last year.
Total sales also fell by 5.8% to $3.59 billion. Total sales per square metre slumped closely, falling 5.7% to $3,396/per sqm.
Gross margin slipped 87 basis points to 30.82% in 2017, versus 31.69% the year before. Cost-of-doing-business leaped 292 basis points notching 35%.
Six weeks ago ChannelNews exclusively revealed the restructure within Big W, a move several analysts state “has not [yet] had time to kick in”.
Concerning the impact of the restructure, parent company Woolworths state they do expect to see “positive customer responses to lower prices, better product solutions and a better customer experience”, however, it rationalises that “it is still too soon to tell when this will translate into sales momentum and profitability”.
Changes made as part of Big W’s restructure, thus far, include; the appointment of several senior executives to head separate category divisions, a clear customer-focused strategy, a price reduction of over 2,000 items, brand refreshment, enhancement of in-store and catalogue “value-focused” communication, plus further in-store improvements.
Focusing on the consumer electronics division, Big W is currently witnessing significant growth and is expected to offer a new range of Philips TVs later this month.
Formerly, Big W was known for being the #1 Apple electronics retailer in Australia, as well as a major seller of gaming, music and video content.
With the next 6 months, Big W will pursue further price reductions, improve its online experience, continue its brand refresh, and offer a new-in-store-look.
The retailer hopes the restructure will “win back the trust of the future”, whilst fixing fundamental foundation basics (e.g. inventory management, direct sourcing and labour management) coupled with a focus on “delivering what our customers want”.
In a note to clients, Morgan Stanley retail analyst Thomas Kierath states “Big W losses [have] exceeded guidance made at third-quarter sales”.
Whilst parent company Woolworths acknowledged the losses were disappointing, Chief Executive Brad Banducci states, “we have a good plan but we’re realistic about what we can achieve in 2018. We need to get sales momentum back into the business. Losses are expected to be broadly in line with this year.”
Analysts such as Mr Kierath state this implies another forthcoming loss of around $150 million in 2018.
While Big W’s losses will have influenced Woolworth’s financials, it hasn’t stopped the group posting a $1.53 billion full year profit, a significant turnaround from the $1.2 billion loss following its Masters Hardware Stores ‘experiment’ last year.