COMMENT:Target Fate Inevitable As Losses Mount
If Wesfarmers move to shut down their struggling discount department store and many think they will it will see over 12,000 staff face an uncertain future.
Wesfarmers has over Target 280 stores in Australia and if closed down it will also shift sales into K Mart another Wesfarmers store as well as deliver additional customers for the Woolworths owned Big W which has also been losing money prior to the outbreak of the Coronavirus.
Right now, no Corporation can continue pumping money into a loss-making business, they need capital to keep their good businesses going due to the economic epidemic sweeping Australia and the rest of the world due to the Coronavirus.
Target has struggled for several years, back in February Wesfarmers reported a $67 million dollar half year decline in revenues at Target.
Kmart sales increased $241 million, more than offsetting a sales decline of $67 million in Target which is proving to be a drag on Wesfarmers profits.
Other Wesfarmers businesses such as Bunnings increased revenues 5.3 per cent to $7,276 million for the half, with earnings increasing 3.1 per cent to $961 million.
Officeworks’ another Wesfarmers entity which is currently booming due to work at home demands saw revenue increased 11.9 per cent to $1,231 million, with earnings of $79 million up 3.9 per cent on the prior corresponding period.
The Target story began in 1926 when two men, George Lindsay and Alex McKenzie, opened a drapery store in Geelong, Victoria after signing a partnership the previous year.
The store primarily sold dress fabrics, Manchester and furnishings. A pioneer of discount retailing, Lindsay’s business methodology was ‘half the profit, twice the turnover’.
After acquiring the original store from Lindsay in 1957, Geoff Betts, John Wade and their team grew Lindsay’s original discount retail philosophy from its single store base in Geelong to a state-wide multistore business.
By 1968, Lindsay & McKenzie Pty Ltd had grown to 14 small stores around Victoria. Myer Emporium Ltd, recognising the potential for growth, bought the business and the company became Lindsay’s Target Pty Ltd.
In March 1973, we became Target Australia Pty Ltd, and in August 1985, the Myer Emporium Ltd and GJ Coles & Coy Limited merged, becoming Coles Myer Limited. In 1996 Fosseys and Target merged, and in 1999, Fosseys stores were converted into Target stores, bringing the benefits of our services and fashion to regional areas.
In late 2006, the group name changed to Coles Group Ltd after the divestment of Myer, and in November 2007, Target was acquired by Wesfarmers as part of the Wesfarmers acquisition of Coles Group Limited.
The exit while a massive blow to employees and related businesses was most probably going to happen prior to Coronavirus after Wesfarmers struggled to find a buyer for their K Mart and Target operations.