Wesfarmers open to selling Target as more stores set to close
The owner of Target has warned more stores are set to close, with the COVID-19 crisis adding to the department store chain’s woes. But there could be a way to save the struggling brand.
Business
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Target could be sold as part of a major strategic review into the future of the struggling department store chain being undertaken by owner Wesfarmers.
Wesfarmers chief executive Rob Scott has also warned more Target stores will close and the fate of many others lies in the hands of landlords who need to cut rents to ensure outlets can become financially viable.
“We clearly need to make some changes in order for Target to become a commercially viable business,” Mr Scott told Business Daily on Tuesday.
“The current store network and size of stores in some areas is not viable.
“There will be some stores where it might be viable to retain a Target or convert it to a Kmart if there is some landlord support. But in the absence of support from landlords, it is likely to be a much smaller network.”
While the COVID-19 crisis was adding to Target’s pain, Mr Scott said the entire department store sector had been struggling for years.
Rather than just short-term rent relief linked to the COVID-19 crisis, Mr Scott said department stores needed permanent rental reductions, less stores and smaller store sizes to reflect their changed position in the retail landscape.
“There has been enormous changes and disruption in retail over the past 10 to 20 years but the nature of a lot of store formats and leases within the department store space hasn’t changed at all,” he said.
Wesfarmers, which also owns Bunnings, Officeworks and Kmart, operates about 285 Target stores.
It has previously warned about 15 stores would permanently close this financial year, although that was before the outbreak of COVID-19.
Mr Scott would not be drawn on how many stores were now likely to close, saying that would be finalised by the strategic review which will be wrapped up by June 30.
But he did say Wesfarmers was open to selling the chain.
“All options are on the table,” he said.
“Target has a number of positive attributes. It is a strong brand, it has loyal and engaged team members, it has a number of profitable stores, it has a growing online business.”
While deep change was needed, Mr Scott said he did not believe Target would disappear from the retail landscape.
“I’m confident that there is a future for Target,” he said.
Mr Scott was speaking after a trading update showed Bunnings and Officeworks posted strong sales growth during the three months to March and first three weeks of April compared to the same period a year ago amid virus-enforced lockdowns.
Sales at Kmart and Target for the three months to March were broadly in-line with the same period in 2019 but sales at Target had “declined significantly” in recent weeks, Wesfarmers said.
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