https://www.dailymail.co.uk/news/article-8346097/More-70-Target-stores-close-massive-restructure.htmlThursday, May 21st 2020 6PM 37°F 9PM 36°F 5-Day Forecast
Australia's largest department store chain Target announces closure of 167 outlets in massive restructure - with some being turned into a Kmart - after a record $67 million sales slump Across Australia, 92 Target stores are being converted into popular Kmarts
But a further 75 are being shut down completely after financial struggled
The company said Target shops were 'unsustainable' while Kmart is profitable
On Friday, owners Wesfarmers unveiled its drastic restructure to save money
By Alisha Rouse For Daily Mail Australia
Published: 19:07 EDT, 21 May 2020 | Updated: 22:28 EDT, 21 May 2020
Struggling Australian retailer Target will close 75 of its stores, and convert 92 others into Kmarts, it has announced.
Following a financial review, the company revealed plans to drastically restructure as the brand suffered a $67 million sales slump.
Ten to 25 large Target stores will be closed, alongside 50 smaller Target Country stores.
An additional 25 regional Target Country stores will be converted into small Kmarts, while between ten and 40 large stores will become big Kmarts.
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This means anywhere between 122 and 167 Target locations will either be converted or shut - which amounts to around half of Target's network of 284 stores.
Announcing to investors on Friday morning, owners Wesfarmers said the restructure would reduce Target's 'unsustainable' cost base and allow it focus on the more-profitable Kmart.
Target (pictured in Sydney) has announced the closure of up to 75 of its stores, with others being converted into Kmarts
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Target (pictured in Sydney) has announced the closure of up to 75 of its stores, with others being converted into Kmarts
The coronavirus outbreak meant many shops in Australia had to close for months, with less customers in the streets (pictured, shoppers in face masks in Sydney on May 17)
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The coronavirus outbreak meant many shops in Australia had to close for months, with less customers in the streets (pictured, shoppers in face masks in Sydney on May 17)
Target staff will be offered jobs at Kmart or other Wesfarmers companies, including Bunnings and Officeworks.
The changes will be implemented over the next 12 months, with most of the work to rebrand stores being carried out in 2021, but details of which stores and closing and which are converting were not released.
The closures and conversions are likely to cost the company between $120 million and $170 million over the next year.
A further $140 million will be used for one-off store conversion and stock clearance costs.
Wesfarmers chief Rob Scott said the company hopes to focus on its online sales.
'The actions announced reflect our continued focus on investing in Kmart, a business with a compelling customer offer and strong competitive advantages,' he said.
'While also improving the viability of Target by addressing some of its structural challenges by simplifying the business model.
'While accounting standards require us to recognise an impairment of assets within Target to implement the restructuring, these actions will allow us to enhance the overall value of Kmart Group and further strengthen Kmart.'
Target designer Dannii Minogue (pictured) is seen at the brand's fashion show during Melbourne Fashion Week in 2015, as the company tried to inject some glamour
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Target designer Dannii Minogue (pictured) is seen at the brand's fashion show during Melbourne Fashion Week in 2015, as the company tried to inject some glamour
But the company warned that even more stores could be shut entirely if landlords don't help with the costs of converting stores into Kmarts.
Mr Scott told the Australian Financial Review on Friday that more Kmart stores could help increase overall football into shopping malls and centre.
Announcing the conversion of some stores, Wesfarmers said it was subject to 'subject to landlord support'.
'To convert stores costs money and there are some stores that are not commercially viable in the current structure,' Mr Scott commented.
'In some cases it's better to close stores than to keep pursuing unviable stores.
'The opportunity is to work out how we jointly share the costs and share the benefits.'
Many stores will be converted into Kmarts (pictured in Sydney) with the store still offering popular items
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Many stores will be converted into Kmarts (pictured in Sydney) with the store still offering popular items
HISTORY OF TARGET
Target is Australia's largest department store chain with 284 stores across the country.
Established in 1926, the retailer was originally known as Lindsays until 1968, when Myer Emporium bought the chain of 16 stores across Victoria, which were renamed Lindsay's Target.
The retailer was renamed Target Australia in 1973.
On April 28, Wesfarmers has fast-tracked a review into the commercial viability of the struggling retailer after a worse than expected slump in sales.
The department store chain's revenue and profits have taken a 'significant' hit during the coronavirus lockdowns, which have left shopping centres deserted as retailers temporarily close their doors.
Announcing the fast-paced review, Mr Scott highlighted Target's 'unsatisfactory' financial performance in a trading briefing to investors, and said store closures were 'inevitable'.
While sister department store chain Kmart remains profitable in deteriorating trading conditions, Target's earnings have slumped significantly.
Wesfarmers says a decline in in-store sales will continue declining sales is expected to persist (pictured, shoppers in Sydney's deserted Pitt Street Mall on April 27)
Wesfarmers says a decline in in-store sales will continue declining sales is expected to persist (pictured, shoppers in Sydney's deserted Pitt Street Mall on April 27)
In February, Kmart swung to a 5.5 per cent first-half comparable sales growth from a 0.6 per cent decline a year ago, with revenue at the discount department store up $241 million or 7.6 per cent to $4.99 billion.
Target's comparable sales went the other way, though, falling 2.3 per cent compared with 0.5 per cent growth a year ago as it recorded a worse-than-expected $67 million sales slump.
Target is Australia's largest department store chain with 284 stores across the country.
Established in 1926, the retailer was originally known as Lindsays until 1968, when Myer Emporium bought the chain of 16 stores across Victoria, which were renamed Lindsay's Target.
The retailer was renamed Target Australia in 1973.
Wesfarmers fast-tracked a review into the 'unsatisfactory' performance of Target (pictured), which has resulted in the closure of some stores
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Wesfarmers fast-tracked a review into the 'unsatisfactory' performance of Target (pictured), which has resulted in the closure of some stores
A couple in face masks are seen walking past sales signs in an empty Pitt Street Mall in Sydney (pictured) on March 28, shortly after restrictions were brought in
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A couple in face masks are seen walking past sales signs in an empty Pitt Street Mall in Sydney (pictured) on March 28, shortly after restrictions were brought in
Announcing the fast-tracked review last month, Mr Scott admitted the already embattled Target had been badly hit by the coronavirus pandemic.
Shopping centres across the country emptied out almost overnight after people were encouraged to stay home and only go out for essential reasons to stop the virus spreading.
'In recent weeks, in-store sales momentum has moderated in Kmart and has declined in Target, reflecting the broader decline in customer footfall shopping centres and ongoing weakness in discretionary categories, particularly apparel,' Mr Scott told investors.
But he insisted online sales were still strong.
'We are getting very strong growth in online in Target, it’s a great brand, with loyal customers, and a very engaged and loyal team,' he said.
'So there are assets of value we can work with but we need to get the property structure and network right to ensure the cost base is right for the future.'
Target (pictured in Melbourne) is Australia's largest department store chain with 284 stores across the country
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Target (pictured in Melbourne) is Australia's largest department store chain with 284 stores across the country
A quiet Queen Victoria Building, usually a busy Sydney shopping area, is seen quiet on March 27 (pictured)
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A quiet Queen Victoria Building, usually a busy Sydney shopping area, is seen quiet on March 27 (pictured)
Market strategist Evan Lucas, from IG, explained Target was 'consistently under-performing.
He said part of this was down to a change in the market, with the introduction of other high street clothing brands such as Topshop and Zara.
'Target has consistently underperformed as it’s been wedged in that space now dominated by the interlopers,' he told the Herald Sun.
'They have much bigger turnover in apparel, which used to be Target’s strength, and can offer higher discounts.
'Target now finds it has an inability to compete on price, these raiders can use cheaper labour from overseas.'
It has been a difficult time for the retail sector, with many shops closed for months due to the coronavirus outbreak (pictured, shoppers in face masks in Sydney on April 27)
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It has been a difficult time for the retail sector, with many shops closed for months due to the coronavirus outbreak (pictured, shoppers in face masks in Sydney on April 27)
It comes off the back of a series of major closures changing the face of the Australian high street.
Household names like Harris Scarfe, Bardot, Roger David, and Napoleon Perdis dropped like flies in the past year with dozens of stores closing resulting in heavy job losses.
Experts claim that the could be the tip of the iceberg as consumers continue to turn more to online shopping over bricks and mortar stores.
Australian retail growth is at its worst level since the early 1990s recession and international giants like Amazon and Aldi threaten to further shake things up.
Australia is headed for a retail apocalypse that could even kill off Myer, which recently closed its store in Hornsby, Sydney, after 40 years of serving customers
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Australia is headed for a retail apocalypse that could even kill off Myer, which recently closed its store in Hornsby, Sydney, after 40 years of serving customers
Entrepreneur Dick Smith believes the outlook is so bad, high-profile collapses will accelerate until there's very little left.
'We will end up with just Amazon and Aldi and basically all the Aussie companies will be sent to bankruptcy,' he told Daily Mail Australia.
'All those famous brands will go. Some of them might exist in name only but will be taken over by overseas companies.'
Mr Smith watched the electronics chain that bore his name crash in 2016, decades after he sold it in 1980. The collapse was one of Australia's biggest retail failures.
Harris Scarfe, founded in 1849, also took consumers by surprise when it entered administration in December, with the closure of at least 21 stores.
Experts have warned Bardot (pictured) and Harris Scarfe are just the start of the downfall of big-name Aussie brands
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Experts have warned Bardot (pictured) and Harris Scarfe are just the start of the downfall of big-name Aussie brands
Kmart (pictured in Chatswood on May 6) has stayed open throughout the pandemic, attracting queues of customers
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Kmart (pictured in Chatswood on May 6) has stayed open throughout the pandemic, attracting queues of customers
Target's boss Mr Scott admitted the department store faced 'a number of structural challenges', blaming the size of the shops and high rental costs.
'A lot of the structural challenges facing department stores relate back to the number of stores, the size of stores and the nature of occupancy costs in a world where online is more relevant,' Mr Scott told The Australian Financial Review.
'Target is growing online sales quite strongly – it's timely to review the store network.
'That could mean store closures, it could mean conversion of some Target stores to Kmart, and it could mean reviewing the size of the stores we have in the network.'
On Friday, he admitted in a statement to investors that Target was not well positioned to tackle the new retail landscape.
'For some time now, the retail sector has seen significant structural change and disruption, and we expect this trend to continue,' he wrote.
People are sen walking around an empty Melbourne on March 19 (pictured) as city centres resembled ghost towns at the height of the pandemic
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People are sen walking around an empty Melbourne on March 19 (pictured) as city centres resembled ghost towns at the height of the pandemic
COVID-19 labour market at a glance
Unemployment: it surged from 5.2 per cent in March to 6.2 per cent in April - the highest since September 2015
Number unemployed climbed by 104,500 to 823,300
In April, 489,800 people left the labour force, which meant 594,300 either lost their job or gave up looking for one
Underemployment soared by 4.9 percentage points to record 13.7 per cent
Tally of underemployed Australians surged by 603,300 to 1.8million
Participation rate plunged by an unprecedented 2.4 percentage points to 63.5 per cent
Source: Australian Bureau of Statistics
'With the exception of Target, Wesfarmers' retail businesses are well-positioned to respond to the changes in consumer behaviour and competition associated with this disruption.'
As well as crippling a number of beloved high street stalwarts, the coronavirus crisis has left thousands of Australians unemployed.
The jobless rate soared from 5.2 per cent in March, before the shutdowns of non-essential businesses, to 6.2 per cent in April.
This is the highest rate since September 2015 as a record 600,000 Australians either lost their job or gave up looking for one.
A similar number had their hours cut, leaving Australia with a record underemployment rate.
Unemployment is above the levels of the global financial crisis a decade ago, following the closure of pubs, clubs, gyms and cinemas to slow the spread of coronavirus.
Sonia Kruger (pictured) showcases designs during the Jean Paul Gaultier x Target show during Melbourne Fashion Festival on March 9 2016
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Sonia Kruger (pictured) showcases designs during the Jean Paul Gaultier x Target show during Melbourne Fashion Festival on March 9 2016
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