Woolworths has announced it will close as many as 30 stores, including four Metro sites, and will axe 500 head office jobs amid a company restructure.
Woolworths CEO, Brad Banducci, said the company has significantly slowed its supermarket rollout program to focus on renewing existing stores.
“We will close some underperforming and non-strategic stores and cancel or defer pipeline stores to allocate more capital to renewing our existing store network,” Mr Banducci said.
Woolworths, which has more than 960 supermarkets, expects to net new supermarket openings from 90 planned over the next three years to 45. Within Australia, 17 Woolworths supermarket stores with an average remaining lease term of six years and four Metro stores with an average 11 year remaining lease term are slated for closure. Six New Zealand supermarkets will also close as well as three hotel sites.
There is uncertainty around whether the company would renew the leases at the end of the lease term in 34 other underperforming stores, of which Australian supermarkets account for 15 sites with a further five Metro sites, three New Zealand supermarkets, one hotel site and 10 fuel sites.The company has also identified 20 sites where development will be deferred or no longer proceed.
“The actions announced [Monday] result in Woolworths recognising a significant item of $959 million or $766 million after tax in our financial year 2016 results. $571 million of the pre-tax number will be non-cash,” Mr Banducci said.
“While we have had to make some tough decisions and this has ramifications for many of our team, we are confident we are putting in place solid foundations for the future and early results give us confidence we are on the right track. This will be a three to five year journey and we are determined to drive sustainable improvements in sales per square metre and return on funds employed to deliver value for shareholders.”
As part of the cost cutting program the supermarket giant has also confirmed 500 jobs will go from its support office and supply chain, while 1000 employees will be moved from the group office into businesses. Woolworths will also close its Hume Distribution Centre in Victoria in 2019.
“We have changed our group operating model and moved more than 1000 team members directly into our businesses to improve accountability and help us better support our store teams and customers. We are also streamlining our shared services and as a result approximately 500 roles will be permanently removed from our support office and supply chain. We will continue to review non-customer facing roles throughout the business,” Mr Banducci said.
What next for Woolworths Metro?
A Woolworths spokesperson told C&I the company was currently not in a position to confirm the locations of the Metro stores which will be closed as part of the restructure.
The Woolworths Metro format was first launched in 2013 in Woolloomooloo, Sydney. The express style stores are understood to generally operate on an average footprint of around 600sqm and are located in inner city, high foot traffic locations.
Last month Woolworths opened its smallest Metro store to date in Sydney’s CBD. Located on York Street, the 310sqm store takes the total number of Metro stores to 16, with seven stores in both New South Wales and Victoria, and two stores in Queensland.
“We will continue to look at opportunities to bring our new Metro format to local time poor shoppers. Part of this will see a new Metro store opening on George Street in the CBD towards the end of the year,” the spokesperson said.
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