Woolworths Ltd has announced the end of its troubled Masters hardware joint venture, even as it reported its first full-year loss since 1993.
The group said it will wind up the loss-making Masters business, with all stores expected to be closed by 11 December. It will sell off all the stock before the closures, and will honour customer gift cards, warranties, returns, lay-bys and contracted home improvement projects.
Following this, it will sell the 61 outlets and 21 development sites to a group called Home Consortium, which includes the companies behind Spotlight Group and Chemist Warehouse. Home Consortium plans to convert the sites into large-format retail centres, which will host chains such as Chemist Warehouse, JB Hi-Fi, The Good Guys, Super Amart, Bunnings Warehouse and Woolworths supermarkets.
Woolworths said it expects about A$1.5bn in gross proceeds, and about A$500m in net proceeds from the sales. The sale of its stock will be managed by inventory divestment specialist GA Australia.
The deal is subject to the approval of the Lowe’s group, Woolworths’ JV partner.
The announcement came even as the group reported a net loss of A$1.23bn for the fiscal year ending 26 June 2016, the first such development since its public listing in 1993. Last year, it reported a profit of A$2.15bn. The group also saw its underlying operating profit fall by 35.5% to A$2.56bn.
Overall sales were up a modest 0.6% to A$53.5bn (excl. fuel), as a 0.2% decline in Food sales to A$34.8bn (LFL -1.3%) was offset by a 4.7% increase to A$7.6bn at the Endeavour Drinks Group and a 3.8% rise to NZ$6.1bn at New Zealand Food. The group however reported a 2.8% decline in sales to A$3.8bn at the BigW banner.
CEO Brad Banducci attributed the poor results to the “decisions we have taken and investments we have made”, but he insisted they had “been necessary to begin the rebuilding of Woolworths.” He also claimed the group was “seeing early signs of progress”, although he admitted that “we are not underestimating the size of the task that lies ahead, especially given the highly competitive nature of the markets in which we operate.” He added: “As we have consistently said, this is a three to five year journey.”