Woolworths writes down EziBuy by $A309m and puts it up for sale

Australian supermarket chain Woolworths has written off $A309 million from the value of its New Zealand clothing and homeware retailer EziBuy and wants to sell the business as part of an overhaul that will also see some local Countdown stores closed.

Woolworths bought EziBuy for $350 million in August 2013 from founders Peter and Gerard Gillespie and Australian private equity firm Catalyst Investment Managers, with a view to learning from the New Zealand firm's success in selling through different channels. The Sydney-based company today said it has split EziBuy from its Big W business "following the recognition that the expected synergies between these two businesses have not been realised and in many cases have resulted in dis-synergies for both businesses."

EziBuy is expected to post an annual loss of between $A13-18 million before significant items when Woolworths reports its results on August 25. The separation and poor trading performance prompted the impairment charges on goodwill and other intangible assets.

"As a result, we have separated Big W and EziBuy and will look at options to sell EziBuy," chief executive Brad Banducci said in a separate statement. "The team has been working hard on a plan to transform EziBuy and that work continues."

The changes are part of a wider move at Woolworths to lift profitability, with 500 jobs to be cut from the company's support office and supply chain and a further 1000 to be moved from group office into the businesses.

Woolworths will face $A959 million of restructuring costs in the 2016 financial year, including the EziBuy impairment, closing down underperforming supermarkets and scaling back new stores. The company closed three stores, including one New Zealand Countdown supermarket in 2016 and plans to close 30 stores across its portfolio, of which six are Countdown supermarkets. Three more Countdowns have been marked as underperforming out of the 34 stores whose future remains uncertain.

The retailer said earnings before interest and tax from continuing operations were between $A2.55-2.57 billion in the 2016 financial year.

The ASX-listed shares last traded at A$22.45 and have dropped 8.4% this year.

(BusinessDesk)

Get full access to the NBR Rich List 2016, released July 28, by claiming your free 30-day trial to NBR ONLINE premium content at NBR.co.nz/free