Retail giant Woolworths is to close “approximately” 30 Big W stores – but industry experts doubt the bold plan will be enough to save the struggling chain.
Monday’s announcement follows weeks of speculation that as many as 60 of the 183 ailing chain’s shops could face closure as Woolworths looks to bolster Big W’s profitability.
However, IBISWorld senior industry analyst Kim Do said pulling the plug on 30 already underperforming branches was not expected to have a sizeable impact on the business’ performance, and more closures were likely.
“Thirty stores is surprising, because most analysts expected it to be more,” Ms Do said.
“They’ve said they’ll close 30 in the next three years, but IBISWorld predicts that number will grow in the next five years if their profits don’t improve.”
Two distribution centres – one in Monarto, South Australia, and one in Warwick, Queensland – will also be closed in financial year 2020-21 and financial year 2022-23 respectively. The closures are likely to mean the loss of 200 jobs.
Woolworths has not said where the 30 stores to be shut are. But Ms Do said they would most likely be in regional and suburban areas.
“Big W doesn’t have many city locations, and where they do we expect those stores to be more profitable,” Ms Do said.
The locations of closing distribution centres might also offer hints for which stores would follow, she said.
“Woolworths said they wanted to bring the supply chains closer to each there, and closing these two distribution centres suggests they don’t see a need for them. But this is all just speculation,” Ms Do said.
South Australian Treasurer Rob Lucas said on Monday closing the Monarto centre would be a blow to the state’s economy.
“Clearly Woolworths is a massive company and there should be some capacity for redeployment and retraining within the group,” he said.
“Ultimately this is a commercial decision that has been taken by a private sector player, which will have a significant impact on those individual workers and families.”
Investors responded positively to the news, with shares in Woolworths Group rallying 2.6 per cent by 2.30pm (AEDT).
‘Robust and sustainable’ future
In a note on the ASX, Woolworths Group chief executive Brad Banducci said the closures would mean a “more robust and sustainable store and distribution centre network” and improve the business’ performance.
“It will accelerate our turnaround plan through a more profitable store network, simplifying current business processes, improving stock flow and lowering inventory,” he said.
Mr Banducci also acknowledged the effect this would have on staff of the affected stores and distribution centres, and said the company will “endeavour to provide affected team members with alternative employment” within the broader Woolworths Group “where possible”.