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Serious Questions Being Asked About Big W Future After Target Chainsaw Carve Out

Serious questions are being asked about the future of Big W following the decision by Wesfarmers to take a chainsaw to Target in an effort to carve out a profitable future for the discount retailer.

Big W has struggled, and it is only of late that key categories such as appliances and consumer electronics have seen a marked improvement. Now observers are tipping that Woolworths the owners of Big W who have had a successful run during the COVID-19 pandemic are again running a ruler over the business with analysts tipping more store closures than the 30 already announced.

Nine Media said recently that Wesfarmers’ decision to take an axe to discount chain Target has put a focus on rival retailer Woolworths’ own struggling department store, Big W, which could be set to accelerate or expand its own store closure plans.

On Friday, Wesfarmers announced it would shut 75 Target stores and convert a further 92 to Kmart’s as part of a massive $790 million restructure, putting an end to years of uncertainty over what the retailer would do with the two competing chains.

Argo Investments’ managing director Jason Beddow told the SMH, that as Big W faces many of the same challenges confronting rival Target, primarily around differentiating its product offering away from low-cost leader Kmart.

He said, “There are only so many people buying at that price point and going to department stores, but it should help them marginally,” he said. “But the whole groups got the same challenges as Target, in some ways.”

In the consumer electronics category Buyer Tarren Singh has been credited with turning the division around with the introduction of key brands including Cygnett, Belkin, Apple, Fitbit, and Sony. This say observers has given the category “pedigree” while allowing them to introduce value brands from the likes of Laser Corporation, Tempo with their Polaroid TV, and headphone and soundbar range.

Beddow said of Big W “It’s not quite as well-positioned as Kmart. Big W has a bit of the [cheaper] Kmart end and also some of the [more expensive] Target end.”

Big W’s track record is not good the discount retailer has losses and $286 million in impairments.

In April last year, Woolworths announced that they were set to close 30 stores in an effort to make the chain viable, incurring a cost of $270 million now observers of the Target fiasco and taking into account the impact of COVID-19 are tipping more than 30 stores will be closed.

White Funds managing director Angus Gluskie said that the recent Target announcements, could even kick off a long-term trend away from big-box retailing,

“Department stores see benefits in shrinking their floor space, lowering staff numbers, and condensing their offering. They are hoping that this more compact offering is not only more structurally cost efficient, but is more clearly defined for consumers,” the Woolworths shareholder said.

“It is highly likely that Woolworths would be coming to similar conclusions.”

Shutting more unprofitable stores and condensing their offering would be the most likely options Woolworths is considering, Mr Gluskie said.

Mr Beddow agreed, saying the 30 stores slated to close would be just the “tip of the iceberg”. So far, four stores have been closed. “As leases expire, unless they’re profitable [they’ll shut],” he said.

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