Woolworths Ramps Up Big W Sale Plan
Despite a turnaround plan being implemented by its parent company, embattled discount store, Big W, may be about to sell off 40 of its best locations.
According to reports, UBS investment bank is developing a plan to package up Big W discount stores and sell to a potential buyer for major client Woolworths.
The news follows reports that Woolworths intends to close 30 stores to boost profitability over the next three years, as well as two distribution centres at the end of their respective leases.
However, The Australian is reporting that Woolworths has confirmed that it has no immediate plans to sell any stores, and is instead focusing on a “turnaround plan”.
Despite this, it reports that investment bank UBS may be planning to sell off 40 of the 183 Big W stores — including the best performing locations.
In recent years, Woolworths rejected offers of $1billion from Kohlberg Kravis Roberts, TPG Captial and Blackstone for Big W.
Since then, losses have risen, likely in part to Amazon’s growing presence in the Australian market.
Another factor is $2.7 billion in lease commitments over close to a decade and $350m of pre-tax losses over three years
Recently the discount retailer reported a 7.4% lift in Q3 same-store sales, however, profitability remains a challenge, it’s on track to slip $100 million into the red this financial year.
Parent company affirmed its profit improvement was slower than planned, citing a slower recovery of higher margin categories (e.g. apparel) and stock-loss challenges.
Selling off the most profitable Big W locations makes for a more appealing prospect for a potential buyer.