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Wesfarmers Catch Now A Basket Case, Speculation It Will Be Sold

Catch founders Gabby Leibovich and Hezi Leibovich pocketed $290M when they sold the online business to Perth retail conglomerate Wesfarmers, now the business is bleeding losses having struggled to make a profit under the management of the big retail group who own Officeworks, Bunnings, Kmart and Target, and are still insisting that the online business will one day “Add to future earnings”.

Now after years of losses, speculation is that the business could be put up for sale or simply closed down.

The Australian newspaper has even speculated that the two brothers who founded the business could do a Kerry Packer who after selling the Nine Network to Alan Bond for $1.05 billion he managed to buy it back three years later for just $250 million.

Wesfarmers CEO Rob Scott has to make a call soon as to whether he is happy for the business to continually bleed losses with the lass for the last six months of 2023 coming in at $41m.

Wesfarmers acquired Catch Group in June 2019 for $230 million in cash.

Catch has always struggled; the biggest turn around came when they moved to copy Amazon and replicate their marketplace offering.

This allowed other online retailers to display products from a multitude of distributors in front of millions of Catch customers in return for a commission on each sale.

The marketplace became Catch’s key growth driver and in the six months to December 2018, gross transaction value (the total value of all sales via its platform) rose 62 per cent to $254 million.

During parts of the COVID online boom Catch was without a CEO. Former CEO Nati Harpaz left in April 2020 and was replaced by American Pete Sauerborn, a career executive who had led Amazon. Om’s marketplace business.

The hire looked good, but it failed to deliver the profit growth despite an increase in sales.

Under Sauerborn’s leadership the business in 2020 reported gross transaction had risen 96 per cent to $610 million, helped along by lockdowns and JobKeeper.

Analysts lifted their valuation of Catch to $2 billion, up almost 10 times in only two years and worth more than Kogan.

Sauerborn called it “a great strategic acquisition for Wesfarmers”.

What became an issue was Sauerborn had turned a $17 million profit into a $15 million loss, despite the huge COVID-19 tailwind.

From there, things got worse, and Catch’s performance deteriorated sharply, despite repeated lockdowns in big Australian cities.

A year later, from July to December 2021, total transaction value was stagnant, revenue actually fell, and losses almost tripled to $44 million.

Now Four years on there’s rumour among analysts that Wesfarmers could be reassessing the future for the business and that a sale could be on the cards.

The Australian claims that Scott is known for his pragmatic and hard-nosed approach to deals that have not worked out for the company, swiftly backing out of the Bunnings UK expansion plans after it became clear that the business was not going to plan.

But the challenge for Wesfarmers with Catch is that it’s already been integrated into the company’s online retail business, so how does it unscramble the egg?

Then there is the issue of who wants to buy a lame online site in a market when retail sales are tanking.

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