Brad Banducci, who was promoted to chief executive in February after the retailer reported its first loss in more than 20 years, has announced big changes to the company’s structure and strategy that will cost $959 million.
Banducci said today that when he took the helm five months ago, the aim was to make the company more customer-focused and “store-centric”.
“We’re making good progress in rebuilding our business,” he said.
“We’ve faced up to reality of where we are, we’ve put the past behind us, and we’re seeing the early signs that our strategy is working.”
Woolworths is cutting 500 office and supply chain jobs and moving another 1000 jobs from the group office directly into its businesses.
It also intends to close 30 under-performing stores across the group – including 17 Australian supermarkets but excluding troubled discount retailer Big W – and is considering another 34 for the chop when their leases expire.
It will slow down the rollout of new stores and focus on improving its existing ones, and will sell the EziBuy online clothing and homewares business because it hasn’t performed to expectations.
Woolworths will incur a charge of $959 million, or $766 million after tax, in its full-year results as it implements the changes.
Redundancy costs, impairments to IT and supply chain assets, and general costs and consultancy fees total $155 million.
The store closures and the cancellation or deferment of new stores will cost $344 million.
The restructure of the Woolworths general merchandise business, which includes a $309 million impairment of EziBuy, will cost $460 million.
Big W chief Sally Macdonald said there would be no immediate Big W store closures, although two may shut at some point.
She said five to 10 new Big W stores may open in the next three to five years in bigger, better shopping malls in Melbourne and Sydney, but that depended on the execution of the turnaround plan.
“The future of Big W is cautiously optimistic,” Macdonald said.
Banducci also said that Woolworths currently had no intention of raising capital and was focusing on its trading performance.
It expects earnings before interest and tax for the 2016 full financial year to be in the range of $2.55 billion to $2.57 billion.
Investors welcomed the news, boosting the company’s shares by $1.89, or 8.4 per cent, to $24.34 at 1456 AEST.
Woolworths in February unveiled a $972.7 million first-half loss as it faced declining food and liquor sales amid strong competition from rivals Coles and Aldi, while its failed Masters hardware chain and Big W also weighed on its bottom line.
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