Money & Banking

Thu, 24 Aug, 2017Danielle McCarthy

Big W's future uncertain after $150 million loss

Big W's future uncertain after $150 million loss

Huge losses from Big W has caused Woolworths to attempt its third turnaround plan for the struggling retailer in four years.

In the 2017 financial year, Big W suffered a loss of $150 million, which was $35 million deeper than the worst-case scenario forecast in May.

This huge loss has caused Woolworths to not dismiss offloading the discount department store.

Chief executive Brad Banducci explained he would be receiving “very challenging” questions from investors about Big W’s future, and did not rule out selling it like Woolworths did to Masters.

"All of our focus is on getting some sales momentum in the group," he told Fairfax Media.

"What happens going forward, we'll wait and see."

Big W managing director David Walker said an almost 6 per cent drop in sales drove the business into greater loss, while cutting prices reduced profit margins.

Mr Walker said that prices on over 2000 products had been reduced to combat popular opinion that Big W products did not give value for money.

"We've got to get trust back with our customers," he said. 

Mr Walker said Big W would attract customers by updating “dated and tired” stores and by making children’s products and homewares its core product categories.

Mr Banducci said there is also potential for improvements in stock availability and store layout.

"Whether that will be enough ... time will tell," he said. 

Woolworths flagged that Big W is expected to lose another $150 million in 2018.

JP Morgan analyst Shaun Cousins asked why it had not contained losses to 2017 and set Big W towards profitability at a faster pace.

"You'd know some of the costs you need to incur ... why haven't you taken more pain in the second half of '17 rather than extend it and prolong it?" Mr Cousins asked on an analyst call. 

Mr Banducci said Woolworths wanted to avoid the “impairments business” and did not want to spend more money on Big W before a clear strategy for the chain was in place.