Kmart & Target To Merge Operations As Market Conditions Impact Wesfarmers Business
The struggling Target discount retailer, which is owned by Wesfarmers is being rolled into Kmart, as the retail group looks to cut their losses by merging their backend operations.
It’s been reported that Target and Kmart are set to remain separate consumer-facing brands with no impact on retail floor staff and only a “handful of redundancies”, mostly in technology and merchandise, noting all changes would occur on the back end of the business.
Kmart Group MD Ian Bailey said “What we found was that running two businesses it was very, very difficult to get the tech into Target, and to get those benefits. This is really why we decided to push the two businesses into one.”
The Wesfarmers retail business delivers around $10 billion in revenue across the two entities, with the restructure designed to boost returns from operational cost cutting.
“We will end up with more jobs in the business a year from now,” he told The Australian Financial Review.
“What we found was that running two businesses it was very, very difficult to get the tech into Target, and to get those benefits. This is really why we decided to push the two businesses into one.”
ChannelNews understands that the move could also see an expansion in the ranging of consumer electronics and appliances categories that have delivered growth for archrival Big W.
According to Wesfarmer management Target MD Richard Pearson is set to take on a new role within Wesfarmers’ health unit.
The AFR claims that Pearson will become its retail director leading the strategy and operational side of the division, including its Priceline chain and loyalty program.
The business that is under pressure due to inflation pain among shoppers is confident that they can still deliver despite a slowdown in retail sales.
“I see value being really front and centre for a long time,” he said. “What we’re seeing is when we can consistently hit good products at great prices, then there’s plenty of demand out there.”
The business which has invested heavily in value fashion and clothing products is due to report shortly.
Best & Less has suffered multiple profit warnings with fewer shoppers passing through its doors, as has other retailers including the BCF-owner Super Retail Group
Kmart CEO John Gualtieri will run the combined Kmart and Target stores day-to-day.
Arjun Puri will move his full attention to Kmart’s home brand, Anko, and head its international expansion push. Anko is selling direct to consumers in India and has a partnership with Canada’s Hudson Bay.
Kmart’s Brad Blyth will continue to lead technology as CIO, including Target’s migration to one set of systems as part of this change.
With mortgage payments increasing, and budgets under pressure from rising food and utilities – even if rents are capped in Victoria by the state government – the retail sector is battling a challenging environment for households.
Mr Bailey said the group had put through 1000 price drops over the past two weeks, leveraging technology such as merchandise planning tools and using Tory, a self-navigating inventory scanning robot which allows the retailer to top up product on the shop floor.
“This change enables us to push the same technology into Target because we will get to a point when we have one technology stack,” he said. “We will run one set of processes. It also means then we have a $10 billion business, which further fragments the cost.
“So, you can see how all of this plays into our productivity improvement.”