Big W Sale On The Cards As Investors Look At Rebranding + New Categories
A leading fund manager has said that Woolworths should ditch its struggling Masters and Big W brands, the recommendation comes as at least two funds approach Woolworth’s management about the acquisition of the Big W department stores.
ChannelNews was told earlier this week in London, that one well known Sydney fund recently met with financiers in London to discuss the raising of capital for a tilt at the Big W chain of stores.
As part of the discussion the concept of rebranding the stores and expanding the categories was discussed.
Hamish Douglass, the founder of Magellan Financial Group has said that Woolworths will struggle for “some time” as the big supermarket group brings in a new management team, he recommends that Woolworths sell their struggling Bi W stores.
ChannelNews understands that one finance group believes that they can turn the Bi W business around by expanding home wares, consumer electronics and appliances while also selling budget clothing and toys.
Earlier this week Woolworths home improvement partner Lowe’s Companies injected another $90 million into their loss-making Masters joint venture – the fourth capital injection this year.
Documents lodged with the Australian Securities and Investments Commission this week show that the Hydrox Holdings joint venture issued 90 million new shares at $1 each – 60 million to Woolworths and 30 million to Lowe’s – on August 28, the same day that Woolworths revealed that losses from home improvement jumped 33 per cent to $224.7 million in 2015.
Big W has been labelled an ‘albatross’ on Woolworths by leading fund manager Hamish Douglass.
Fairfax Media reported that losses at Masters blew out from $176 million to $245 million, while profits at Home Timber and Hardware rebounded 198 per cent to $20.9 million, boosted by recent acquisitions.
“In the long term, we don’t see Big W fitting part of the Woolworths’ portfolio,” says Magellan’s Hamish Douglass.
“Hopefully over the next 18 months, they will get those albatrosses off their plate.”
Woolworths and Lowe’s have invested $3.22 billion into the joint venture, up from $2.9 billion last year, but the pair are not expected to see a return on their investment for many years.
Most analysts believe the business will not break even until 2020 at the earliest.
Masters is generating sales of less than $20 million a store, compared with estimated operating costs of $26 million a store, so losses have increased as more stores have opened.
Earlier this week hardware consultant Geoff Dart, a director of DGC Advisory, said accumulated losses could reach $1.3 billion by 2020 unless Masters changed its format to focus on the home decoration and lifestyle market.