Struggling bargain chain store Big W could be forced to close a third of their 183 stores Australia-wide due to falling profits.
Macquarie Wealth Management revealed the news in a client note today, stating that they may close 60 stores Australia wide after losing $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, revealed in 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.’
One thing that could stand in the way of the mass store closures, however, is the massive costs the company would incur due to the existing $2.7 billion in lease commitments.
Macquarie went on to say that 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.’
It was also revealed that half of Big W’s stores were located in challenging regional areas, which some believe could be hit by store closures if they were to happen.
‘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.’
A spokeswoman for Woolworths, who own Big W, said a final decision had not been made as yet.
‘At our half-year results in February we announced a national review of our Big W store and distribution centre network,’ she said.
‘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.’