Target to close dozens of stores over next five years

DISCOUNT department store Target is manoeuvring itself to tackle fashion retailers like H&M and Zara as the long-running retailer reveals plans to close stores. But sister store Kmart is only getting stronger.

Target is set to close stores. Picture: Peter Ristevski

DOZENS of Target stores are set to close over the next five years with half of the outlets running at a loss, the head of the discount department store chain has warned.

But the store is repositioning itself to take on fast fashion giants including Zara, H&M and Uniqlo, according to Wesfarmers department stores chief executive Guy Russo.

“H&M and Zara and Uniqlo are the things we’re going after,” he said.

Mr Russo said this morning that Target was set to reduce its store space footprint by 20 per cent over the next five years.

Perth-based Wesfarmers owns Target, Kmart, Coles and Officeworks among other businesses.

Target operates 305 stores across Australia with half of those running at a loss over the past two financial years, Mr Russo said.

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Target boss Guy Russo did not say which stores would be closing.

Mr Russo said he was focused on store space — not store numbers — but said he would not renew leases on loss making stores as they expired over the next five years.

“When a lease comes up … it would be at that point I would close a store,” he told a Wesfarmer’s investor strategy day this morning.

“We called it space instead of store numbers because I don’t want to allude to the fact that I’m just shutting down small stores.”

Mr Russo said Target had loss-making stores which ranged from 1000 square metres to 9000 square metres in size located in both city and country locations.

“It’s a collection of small, medium and large,” he said of the stores facing closure.

Mr Russo said Wesfarmers would seek to offer impacted Target staff new jobs across the conglomerate’s other retail brands.

But he noted this would not be possible in some country areas.

“We have a lot of high sensitivity of not only our team members in those small country towns but also to the local community where Target has been there for decades,” he said.

Mr Russo — who built Kmart into the discount department store category heavyweight — said half of Target’s stores had run at a loss over the 2016 and 2017 financial years.

H&M is one of the retailers Target is aiming for. Picture: Graham Denholm/Getty Images

He said “half the fleet could be unprofitable” but noted turnaround efforts were set to show up in Target’s upcoming full-year results.

Meanwhile, Kmart is planning on opening eight to 10 new stores annually for the next couple of years.

Kmart managing director Ian Bailey said the retailer would also explore forming joint ventures with overseas partners to sell its wares foreign markets such as Thailand or Indonesia.

“When we do that it will be very small scale,” Mr Bailey said.

Kmart already operates a wholesale business which supplies the Robinson department store chains in Thailand and Indonesia.

Coles chief John Durkan told the strategy day the supermarket chain wants 40 per cent of all products it sells to be its own label within five years.

Mr Durkan said Coles was working to build an “own brand powerhouse” with the goal of having 40 per cent sales penetration of its private label range by 2023.

But the outgoing boss of the supermarket giant said the push to take Coles-branded lines into new areas would not reduce customer choice, adding there was high demand for the supermarkets private label range.

“The last thing we need to do is push stuff onto consumers that they don’t want,” he said today.

“We need to make sure we have the right products with the right quality and right price … we are never going to take away choice.”

Wesfarmers is spinning off Coles into a separately listed business on the Australian stock market in a process which will result in Mr Durkan handing the reins to Metcash supermarkets chief executive Steven Cain.

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