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Target Closing 20% Of Stores, Other Retailers Tipped To Follow

Wesfarmers-owned, Target, has announced it’s culling 20% of its selling space in the next five years – news which could pre-empt a similar move by other retailers. Dozens of Target stores are set to close, or be converted into Kmart.

Insiders claim the move may prompt rationalisation at Big W [and Kmart] as Amazon Australia continues to expand, and range similar or identical products.

A big difference concerns Amazon Australia’s weighty buying power – e.g. an internationally acclaimed whitegoods program with complimentary analytics, to engage with buyers who are stretched for time.

Analysts have informed ChannelNews that traffic congestion in major cities is also contributing to online shopping growth, as individuals opt for ‘couch comfort’ in lieu of battling traffic, and finding a parking space.

Wesfarmers is yet to announce which Target stores are scheduled to close, with some affected staff relocated to other sites (e.g. Officeworks or Kmart).

The news follows several periods of declining revenues and profit at Target – in Q3Y18 sales slumped 5.2%.

Target Chief Executive, Guy Russo, claims nearly half of Target’s 305 stores remain unprofitable, with a smaller operation likely to stabilise the retailer:

“Each site has been evaluated, and when the lease comes up this time around, we have to say to the landlords ‘We’re exiting'”.

“We’re not going to go after size any more – we’ll just be a nice new boutique retailer that plays mid-tier, and I’d like to make sure it’s a profitable mid-tier business,” Mr Russo asserts.

Mr Russo plans to transform Target into a fast fashion destination – similar to the positioning of Zara, H&M and Uniqlo – and reduce the size of operations, to undercut international rivals.

Despite contracting Target, Wesfarmers intends to open 8 – 10 new Kmart stores in ANZ annually. It’s also open to expanding Kmart overseas – e.g. in Thailand and Indonesia, following a middle class boom.

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