Woolworths will close about 30 underperforming Big W stores and two distribution centres over the next three years after increasing numbers of shoppers took their business online.
The supermarket giant, which said Monday it will take a total $370 million hit related to Big W in its full-year results, wouldn’t say which stores would close or how many jobs would go.
But it did confirm a warehouse in Monsarto, SA, will close in the 2021 financial year, with one in Warwick, Queensland, to follow two years later.
Woolworths is still negotiating with landlords but estimated on Monday that the closures would cost $270 million, mostly in lease exit costs but also redundancy payments.
Woolworths will also make a $100 million non-cash impairment against Big W, reflecting the outlook for the broader retail sector and trading conditions as more customers go online.
Chief executive Brad Banducci said Woolworths would try to offer alternative employment for affected staff, but said decisions would be made on a case-by-base basis.
“We are committed to doing the right thing by our team,” Mr Banducci said.
“This decision will lead to a more robust and sustainable store and DC 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.”
The Shop, Distributive and Allied Employees Association said it was working to ensure that all Big W employees receive their rights and entitlements.
Woolworths has 183 Big W stores and the division has been labouring for years, losing $110 million in the last financial year.
Sales rose six per cent in the first 12 weeks of the current financial year but “the profit improvement is slower than planned,” Woolworths said.
The division is expected to report a loss before interest and tax of $80 million to $100 million this financial year.
Mr Banducci said Big W had momentum and was still a business Woolworths wanted to be in.
The supermarket giant on Monday also confirmed a previously flagged $1.7 billion off-market share buyback following the sale of its fuel operations to EG Group.
Woolworths said that, while shareholders would be selling at a discount of between 10 to 14 per cent to market price, tax implications meant the offer would make sense for some.
The company said it would provide a tax calculator on its website.
Woolworths shares rose 2.53 per cent to $31.77 by 1354 AEDT.