Target to close dozens of stores in 'boutique' shift
7 June 2018
Sydney Morning Herald
Target will close dozens of stores in an effort to reduce its footprint by 20 per cent over the next five years and create a "boutique" fashion chain competing with fast-fashion giants H&M and Uniqlo.
The brand, which has 305 stores across Australia, has been a problem child for the Wesfarmers retail conglomerate and the ugly sister to the group's department store powerhouse, Kmart.
Target has been a problem child for the Wesfarmers retail conglomerate.
Wesfarmers' CEO of department stores, Guy Russo, said that having stabilised Target's earnings and reset its cost base, after it ran at a $195 million loss in 2016, the group would further improve profitability by closing underperforming stores when their leases expired.
“We’re not going to go after size any more, and we’ll just be a nice new boutique retailer that plays in mid-tier, and I’d like to make sure it's a profitable mid-tier business," Mr Russo said at a Wesfarmers investor briefing day on Thursday.
Mr Russo said Target was continuing its shift away from its traditional market position as a rival to Kmart and Big W to a more fashionable brand in the mould of foreign fast-fashion giants H&M, Uniqlo and Zara.
“They’ve stopped their growth [in Australia] but they’re enough for my team to be inspired around fashion, quality and their fabrics," he said.
He said he had given his design teams a mandate to improve quality and style, while dropping prices compared to the fast-fashion competitors.
He said "mid-tier" shoppers made up the biggest part of the $83 billion a year apparel, homewares and children's goods markets that it played in, which was why Target could do well while higher-end retailers struggled.
Some Target stores would be converted to the more profitable Kmart brand where it made sense, Mr Russo said. Kmart would continue to open eight to 10 new stores a year, meaning total store numbers would remain relatively flat across the two brands.
Wesfarmers' department stores had total sales of $8.5 billion and wanted to grow that to $10 billion by tapping into offshore opportunities.
Already it is wholesaling its private-brand products to Robinson department stores in Thailand and Indonesia, which Kmart's boss, Ian Bailey, said was a learning exercise for targeting growth markets overseas.
“If you think about us as a product company then it’s the obvious thing to do - it'd be almost crazy not to," he said. “How big is the prize? Well the world’s enormous. I think there’s potential in the long run.
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