It’s been an iconic part of the Aussie shopping landscape for well over a generation, but struggling bargain chain Big W looks set to close up to a third of its 183 Australian stores, amid a disastrous collapse in profits.
The news was highlighted in a note sent to clients by Macquarie Wealth Management, which revealed up to 60 stores Australia wide may be chopped after the company lost $110 million last financial year and $8 million in the first half of 2019.
‘Partial closure of the most unprofitable and shorter lease stores is more likely,’ Macquarie said in the note, reported The Australian.
‘Given significant closure costs for the portfolio, a more likely scenario is Woolworths to close up to one-third of its stores (60 stores), in our view. This cost could be around $759 million.’
But one thing standing in the way of the possible move in the enormous hit the company would take from its $2.7 billion lease commitments.
Macquarie reports the final cost would ‘come down to the lease term remaining on these problematic sites and whether the landlord would accept a discount given potential for alternate use, etc.’
Locations for potential closures remain unconfirmed, but regional areas are expected to be hit hardest.
‘It is unlikely these locations will enable Big W to regain the momentum required for profitability,’ Macquarie said.
‘In a challenging retail environment, we see a reduction in store count as the most likely outcome from the review. Given the format of Big W stores, we believe it would be difficult to reduce space as Myer is doing and that outright store closure is more likely.’
Parent company Woolworths has advised that no final decision has been made yet.
‘At our half-year results in February we announced a national review of our Big W store and distribution centre network,’ said a rep.
‘The review is ongoing and no decisions about our network have been made. We will update our team members and the market once the review has been completed.’