- ‘We’ve faced up to reality,’ CEO Banducci tells analysts
- Pace of new store rollout to halve, Australian retailer says
Woolworths Ltd. jumped the most in almost two decades in Sydney trading after Chief Executive Officer Brad Banducci pledged to overhaul the struggling Australian supermarket chain with asset write offs, job cuts and store closures.
The stock soared 8.2 percent to A$24.30 at the day’s close, taking the company’s market value to A$31 billion ($23 billion). Banducci said he’ll eliminate 500 back-office jobs and move another 1,000 workers into front-line roles. The pace of store openings will halve and Woolworths may sell its unprofitable online clothes and homeware business EziBuy, it said.
After taking over in February, Banducci is racking up one-time charges and redundancy costs at the start of his planned multi-year turnaround. While investors expect Woolworths to post its first loss since listing in 1993, the full benefits of the reorganization will be felt as soon as 2018, the company said Monday.
“We’ve faced up to the reality of where we are and put the past behind us,” Banducci told analysts on a call.
Before this week, Woolworths’s 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.
Woolworths, which operates 960 supermarket outlets, plans to close 30 stores that either lose money or are among the group’s worst performing outlets.
At the same time, the number of new openings planned over the next three years will fall to 45 from 90, the company said. Money earmarked for new stores will instead be spent to refurbish existing outlets, Banducci said on the call.
“The store rollout was going a little fast, so it makes sense to slow down a little,” said Daniel Mueller, an analyst at Forager Funds Management in Sydney. “It all makes sense, but whether it leads to the higher sales or greater returns that they really need to nail remains to be seen.’’
The possible sale of EziBuy comes only three years after Woolworths acquired the business for NZ$350 million ($245 million). It’s just the latest attempt by the Sydney-based retailer to unwind an expansion overseen by former CEO Grant O’Brien.
Banducci’s reorganization will lead to a pretax charge of A$959 million. After a first-half cost of A$3.25 billion to exit the hardware business, the company’s one-time charges in the year ended June will surpass A$4 billion.
A decision to shut underperforming stores and defer new outlets will cost A$344 million, while job cuts and technology writedowns account for A$155 million of the 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.