Australia’s leading Retailer, Woolworths Group (ASX: WOW) is going to close down 30 BIG W stores in the next three years. BIG W is one of the most recognized and trusted brands of Woolworths Group.
In an announcement made on 1 April 2019, Woolworths announced that after concluding the BIG W network review it has identified around 30 BIG W stores which it will close in the next three years and two distribution centres (Monarto, SA and Warwick, QLD) which will close in F21 and F23 respectively.
It is expected that the closing down of stores which are identified in the BIG W review, will lead to a more robust and sustainable store and distribution centres network which will contribute to BIG W's profit.
It is expected that the company will incur a P&L charge of around $270 million for closing down the stores. As part of its reviews, the company has identified one-off pre-tax charge of approximately $370 million and cash cost of around $250 million, in relation to the store exits. Most of the cash outflow from closing down of the stores is expected to occur in FY 2021 & FY 2022.
In the second quarter of FY 2019, BIG W reported comparable sales growth of 5 percent, driven by sales in online and lower margin categories. BIG W’s sales for the first half of FY 2019 were $2.1 billion, which is 2.7 higher than the previous year with comparable sales increasing by 3.8%.
While providing its half-year results, the company foreshadowed the recovery in trading for BIG W and it also noted that the earnings improvement for BIG W is taking longer than planned.
Due to the strong transaction growth in the third quarter of FY 2019, BIG W reported comparable sales growth of 6%, regardless of which, the profit improvement is slower than planned.
Due to ongoing discussions with landlords, the company has not yet released the details of possible store closures. Meanwhile, all stores and distribution centres are trading normally.
Now, let’s have a glance at the company’s stock performance and the return it has posted over the past few months. At the time of writing, i.e., on 2nd April 2019, the stock of the company was trading at a price of A$30.850, down 0.74% during the day’s trade with the market capitalisation of ~A$40.95 Bn. The counter opened the day at $31.280 and touched a day’s low of $30.610 with a daily volume of ~ 16,123,864. The stock has provided a year till date return of 6.62% & also posted returns of 11.40%, 6.62% & 7.80% over the past six months, three & one-month period respectively. It had a 52-week high price of $31.480 and touched 52 weeks low of $26.180, with an average volume of ~2,922,457.
Recently, the company announced an Off-Market Buy-Back after completing the sale of its Petrol business.