Wesfarmers Takes A$774 Million in Costs on Target, Liquor Stores

Wesfarmers Ltd., Australia’s largest private-sector employer, wrote off and set aside A$774 million ($734 million) at its Target department stores and liquor chains associated with its Coles supermarkets.

The Perth-based owner of retailers, chemical plants, coal mines and industrial-equipment suppliers will write off A$680 million of goodwill at Target, the country’s largest department store chain by outlets. It will also set aside A$94 million to pay for a restructuring of liquor stores in its Coles division, the company said in a regulatory statement today.

Writing down the asset value of Target will make it easier for the chain to meet Wesfarmers’ internal measures of return on invested capital. Target has been outpaced by Wesfarmers’ Kmart discount stores amid competition from mid-market department stores Myer Holdings Ltd. and Big W, owned by Woolworths Ltd. The goodwill dates from Wesfarmers’ 2007 acquisition of the chain as part of its A$18 billion purchase of Coles Group Ltd., Australia’s biggest takeover.

“We are pleased with the progress that has been made over the last 12 months in materially strengthening Target’s leadership team,” Richard Goyder, Wesfarmers managing director, said in the statement. “We consider there to be many opportunities to significantly improve Target’s performance.”

The company also put the pretax gain from the sale of insurance businesses, completed June 30, at A$1.04 billion to A$1.08 billion. That will result in a pretax gain of A$261 million to A$301 million during the 2014 fiscal year when set against the costs at Target and Coles, the company said.

Wesfarmers rose 2 percent to A$42.355 at 10:43 a.m. in Sydney trading, compared with a 1.3 percent gain in the benchmark S&P/ASX 200 index.

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