Woolworths to close 30 Big W stores as shoppers move online

The supermarket giant, which also confirmed a $1.7 billion share buyback following last year’s sale of its fuel operations, said it would take a $370 million hit related to the closure in its full-year results.

Woolworths wouldn’t say which stores would close or how many jobs would go as it was still negotiating with landlords.

But it said the closure of 16 per cent of its current Big W store network would cost $270 million, including redundancy payments. It would also make a $100 million non-cash impairment on Big W, reflecting trading conditions as more sales switched to online.

Woolworths has 183 Big W stores and the division has been labouring for years, losing $110 million last financial year.

Big W comparable store sales rose 6 per cent in the first 12 weeks of the current financial year but Woolworths said the profit improvement had been slower than planned and the stores were expected to report a loss before interest and tax in fiscal 2019 of $80 million to $100 million.

Woolworths chief executive Brad Banducci said Big W had momentum and was still a business Woolworths wanted to be in.

“As foreshadowed at our half-year 2019 results, while the recovery in trading for Big W is encouraging and there remains further opportunity for improvement, the speed of conversion to earnings improvement is taking longer than planned,” he said.

“This decision will lead to a more robust and sustainable store and DC [distribution centre] network that better reflects the rapidly changing retail environment. It will accelerate our turnaround plan through a more profitable store network, simplifying current business processes, improving stock flow and lowering inventory.”

Woolworths’ shares jumped 2.25 per cent to $31.085 by 1.30pm as investors cheered news of the buyback.

Chairman Gordon Cairns said the company considered various capital return options after the sale of 540 service stations to Britain’s EG Group for $1.72 billion in November. It decided an off-market buyback was the best option for the company and shareholders and would result in a significant release of franking credits.

Woolworths said, while shareholders would be selling back their shares at a discount of between 10 to 14 per cent to the market price, tax implications meant the offer would make sense for some.