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Retail

Woolworths Books $716 Million Cost Amid Job Cuts, Writedowns

By Steve Wynne-Jones
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Woolworths Books $716 Million Cost Amid Job Cuts, Writedowns

Woolworths Ltd. will book a pretax charge of A$959 million ($716 million) to cut jobs, write down assets and close supermarkets as investors brace for the Australian chain’s first annual loss since listing in 1993.

The Sydney-based retailer will eliminate 500 back-office and supply roles and move 1,000 workers into front-line businesses, it said in a statement to the stock exchange on Monday. Woolworths plans to halve the pace of new store openings and is exploring a sale of its online clothes and homeware business EziBuy.

“A lot of these things sound good, but whether they can execute we won’t know for another year or two,’’ said Daniel Mueller, an analyst at Forager Funds Management in Sydney.

The shakeup is Chief Executive Officer Brad Banducci’s largest since he took over in February to lead a multi-year turnaround. Before this week, Woolworths’ share price had almost halved from its peak in April 2014 as the supermarket giant lost ground to its closest domestic rival, Wesfarmers Ltd.-owned Coles, as well as discount chain Aldi.

“We’ve faced up to the reality of where we are and put the past behind us,” Banducci told analysts on a call. “We’ll continue to review all non-customer facing roles.”

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Woolworths’s stock climbed 4.3 percent to A$23.41 at 10:56 a.m. in Sydney, giving the company a market value of A$29.9 billion.

The post-tax effect of the changes for the year ended June 2016 will be A$766 million, Woolworths said. Even before Monday’s announcement, analysts at Credit Suisse Group AG expected the supermarket chain to post a loss of A$370 million for the 12-month period. That would be the company’s first annual loss since its initial public offering more than two decades ago, according to Bloomberg data.

Woolworths, which operates 960 supermarket outlets, plans to close 30 of them. The number of new stores planned over the next three years will fall to 45 from 90, the company said.

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A decision to shut underperforming stores and defer new outlets will cost A$344 million, while the job cuts and technology writedowns accounts for A$155 million of the total pretax impairment. Woolworths also wrote down EziBuy’s value by A$309 million, while it recorded a charge of A$151 million for its Big W department stores.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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