Australian retail giant Wesfarmers Ltd <WES.AX> said it will close or rebrand nearly two-thirds of its Target department stores and take one-off charges totalling up to A$650 million ($426 million) as it reels from the coronavirus fallout.
The move strikes a blow to what was once among Australia's most durable retail brands and reflects the urgency of brick-and-mortar stores around the world to adapt as sweeping virus-related curbs on movement keep shoppers at home.
With 284 stores nationwide, Target is the country's largest department store network but its owner fast-tracked a review of operations in April after the shutdown intended to contain the virus accelerated a sales slump.
Wesfarmers said it will convert up to 92 Target stores to its low-cost Kmart department store chain, and shut up to another 75 Targets, leaving as few as 117 Target outlets.
The retailer will see an impairment charge of up to A$480 million to reflect a lower value of the Target brand and other assets, plus A$170 million, before tax, in inventory write-offs and other restructuring costs for the year ending June.
"The actions ... reflect our continued focus on investing in Kmart, a business with a compelling customer offer and strong competitive advantages, while also improving the viability of Target," Wesfarmers Managing Director Rob Scott said in a statement on Friday.
"For some time now the retail sector has seen significant structural change and disruption, and we expect this trend to continue."
Target's problems were worsened by COVID-19 but began before the health crisis. In the six months to December, Target's sales dropped sharply as it lost business to low-cost rivals like Amazon.com Inc <AMZN.O> and Kmart.
Wesfarmers' Target is not related to the U.S. chain Target Corp <TGT.N>.
Wesfarmers shares were flat on Friday, versus a broader market <.AXJO> decline of 0.7%.
(Reporting by Byron Kaye in SYDNEY and Shruti Sonal in BENGALURU; Editing by Chris Reese and Himani Sarkar)
