- One investor said Woolworths should focus more on Australian supermarkets
- Big W and its expansion in New Zealand have affected the company’s results
- READ MORE: Kmart launches mega sale
Some of the supermarket’s biggest investors are urging Woolworths to divest its Big W chain and spin off its New Zealand operations into a new business.
Dushko Bajic, a portfolio manager at First Sentier Investors, told a forum in Sydney this week that he had suggested the changes to Woolworths’ new chief executive, Amanda Bardwell, at a recent meeting, the paper reported. Australian financial magazine.
“We would love for you to be just a simple Australian supermarket,” Bajic told Bardwell, who replaced former chief executive Brad Banducci this month.
Bajic said Woolworths, which is bigger than its main rival Coles, should also generate significantly higher profits, but that was not the case.
Coles has streamlined its business into two main divisions of food and liquor, while the Woolworths group has suffered significant losses as Big W and New Zealand stores struggle.
“Reinvest in your business, in your prices and make the most of the best locations in your supermarkets; this will not be matched by your competition,” said Bajic.
‘(Big W) is a business within the (Woolworths) portfolio that has just destroyed capital.’
In August, Coles reported a $1.1 billion after-tax profit, while Woolworths’ net profit of $1.7 billion was down on a $1.5 billion impairment courtesy of its New Zealand operations, where it has expanded aggressively in recent years.
Woolworths’ new chief executive Amanda Bardwell (pictured) took over the role this month after former boss Brad Banducci retired.
Ray David, portfolio manager at Blackwattle Investment Partners, agreed that “on paper” Woolworths should significantly outperform Coles given its size, larger store network and larger logistics assets.
Woolworths Group has a 37 percent market share of the grocery sector in Australia, while Coles Group has 28 percent, according to research firm Statista.
Other investors who spoke to AFR on condition of anonymity due to sensitive financial discussions agreed the New Zealand business should be spun off.
Big W’s main problem appears to be its struggle to compete with rivals Target and particularly Kmart, which dominate the discount department store sector.
A major investor in Woolworths Group told a forum in Sydney that Big W had “destroyed capital” for the wider business as it struggled to compete against its main rival, Kmart.
Kmart is owned by Perth-based Wesfarmers and its profits rose 25 per cent to $958 million in the last financial year.
Wesfarmers also owns the successful hardware company Bunnings, which Woolworths attempted to take on with its Masters Home Improvement stores from 2009 until its closure in 2016.
Masters was a joint venture between Woolworths and US-based Lowes Home Improvement and suffered losses of more than $3 billion.
One investor told AFR that closing Big W stores would be a difficult task given its warehousing and logistics benefits that the supermarket business depended on.
Ben Gilbert, head of research at investment advisory firm Jarden, said maximising returns would be the key focus for both investors and Bardwell when he takes the reins.
“We have no plans to sell BIG W or our New Zealand supermarket business,” a Woolworths spokesperson told Daily Mail Australia.
The company also noted in its most recent financial results in August that “New Zealand Food and BIG W had a challenging year impacted by value-conscious customers cross-shopping and switching products.”
But he said “both companies made good progress on their transformation plans with improved customer scores and item growth in the fourth quarter.”
