Kmart is beating up Big W and giving Woolies a major headache

Woolworths is running out of excuses for the performance of its discount department store Big W, which will lose $70 million in the six months to June this year.

Losing money has become something of a habit for Big W, and with Woolworths losing ground to Coles in the grocery game, a teetering department store is the last thing it needs.

Over a decade-and-a-half, numerous Woolworths chief executives have grappled with how to solve the problem of Big W – the on again/off again problem child of the retail empire. So, can Woolworths current chief executive Amanda Bardwell revive the brand, or will she be the one to pull the pin on it?

With red across the board, Woolworths is back to talking about the need to transform Big W.Credit: Alamy

Kmart is currently bossing the discount department store market, but that’s not the only reason Big W is floundering. As far as excuses go, Woolies could just as easily point to depressed consumer spending for its woes, and who knows the damage a Trump induced global recession would wreak on the brand?

In a quarterly sales update on Thursday, Bardwell fessed up to Big W’s earnings woes, attributing them to the discounting of left-over summer clothing at the start of the calendar year and the expectation that this winter will see the same.

Big W isn’t exactly the home of high fashion, and there’s nothing retailers can do about the weather, but Bardwell can’t blame seasonal aberration for the fact that Big W’s non-clothing inventory hasn’t been selling well enough to offset the problem with apparel.

Big W’s range of toys, beauty products, homewares, sporting goods, appliances and manchester isn’t pulling enough shoppers into its stores.

Compare that to Kmart, which appears to have found the secret sauce that consumers can’t get enough of. Its Anko brand has morphed into a global success, turbocharged by social media posts that constantly highlight items that claim to be able to “revolutionise window cleaning” or home decor “must haves”.

Its ability to copy designer goods and sell them at discounted prices has also been a hit with younger TikTok-crazy consumers.

Meanwhile, Big W isn’t making enough money and its latest losses are significant enough to take the gloss off Woolworths’s overall profit. If Big W’s issues were simple or a one-off they could be forgiven. But over the last 15 years, the discount department store’s earnings have been a rollercoaster ride – sufficient to induce queasiness for Woolworths shareholders.

And once again Woolworths is talking about “transformation” of Big W.

Back in 2018, Woolworths reported that after a loss of $110 million over a couple of ugly years, Big W had turned a corner. “Prices are significantly more competitive than this time last year, the majority of stores have been refreshed, and the range is beginning to resonate with customers. Comparable sales increased by 0.9 per cent in FY18, the first increase since FY09,” Woolworths said at the time.

But here we are again, with red across the board and Woolworths back talking about the need to transform Big W, which has spent far too long sheltered inside the larger business.

Woolworths chief executive Amanda Bardwell faces a difficult task in making Big W relevant again. Credit: Louise Kennerley

Bardwell has publicly recognised that Big W’s problems are a disappointment for shareholders and says that there will be an update on the brand when the full-year earnings are reported in August.

Operating discount department stores can be fraught – years of disappointing results plagued Wesfarmers-owned Target before it was effectively devoured by its successful sibling brand KMart.

Big W could certainly do with a bit of that Kmart vibe before Bardwell is forced to make a call on its future.

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