Woolworths to sell EziBuy

  • 25/07/2016

Six Countdown supermarkets in New Zealand will be closed while the company will look to sell its New Zealand clothing and homeware retailer EziBuy.

Australasian supermarket chain Woolworths will have to find $A35 million ($NZ37.3m) to fund plans to make 500 staff members redundant across Australasia.

The supermarket chain has written off $A309 million (NZ$329.6m) from the value of EziBuy.

Woolworths bought the retailer for NZ$350m in August 2013 from founders Peter and Gerard Gillespie and Australian private equity firm Catalyst Investment Managers, with a view to learning from the New Zealand firm's success in selling through different channels.

On Monday, the Sydney-based company said it had split EziBuy from its Big W business because expected synergies between these two had not been realised and "in many cases, have resulted in dis-synergies for both businesses".

EziBuy is expected to post an annual loss of between NZ$13.9m and NZ$19.2m before significant items when Woolworths reports its results on August 25.

"The team have been working hard on a plan to transform EziBuy and that work continues," chief executive Brad Banducci says.

The changes are part of a wider move at Woolworths to lift profitability, with 500 jobs to be cut from the company's support office and supply chain and a further 1000 to be moved from group office into the businesses.

In a statement to the Australian stock exchange on Monday, Mr Banducci said: "Redundancy cots of $35 million primarily reflect a reduction in approximately 500 roles across our support office and supply chain network".

"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."

The six New Zealand stores to be closed have not been identified, neither have three others that have been identified as underperforming.

The closing stores have an average of nine years left to run on their leases.

Mr Banducci said they were primarily loss-making or fell in the bottom quartile for sales based on square metre.

Woolworths will face NZ$1 billion of restructuring costs in the 2016 financial year, including the EziBuy impairment, closing down underperforming supermarkets and scaling back new stores.

The company closed three stores, including one New Zealand Countdown supermarket, in 2016 and plans to close 30 stores across its portfolio, of which six are Countdown supermarkets.

Three more Countdowns have been marked as underperforming, out of the 34 stores whose future remains uncertain.

The retailer said earnings before interest and tax from continuing operations were between NZ$2.7b and NZ$2.74b in the 2016 financial year.

The ASX-listed shares last traded at $A22.45 (NZ$23.97) and have dropped 8.4 per cent this year.