This move aims to divest a non-core asset and concentrate on its main grocery business. However, it may also disrupt the current structure of the discount department store sector.
In recent months, the retail giant and its investment bank partners have held discussions with private equity firms and other retail operators who might acquire the business. Although interest has been tested before, recent developments show a more intentional and accelerated approach to selling. Big W’s long-standing presence in Australia's discount retail market, with competitors like Target and Kmart, is becoming more difficult to sustain in an environment many believe can only effectively support two major players.
Woolworths' latest reports show that Big W generated $4.1 billion in annual sales, though earnings before interest, taxes, depreciation and amortisation dropped 20% to $180 million compared to the previous year. In 2019, investment banks explored similar deals, with some valuing the business at over $1 billion. Nevertheless, Big W has experienced ongoing financial losses and faces growing challenges from global fashion brands and dominant online retailers.
Although the pandemic briefly boosted Big W’s performance, the store continues to face longer-term obstacles. Several locations have already been closed in an effort to reduce operating costs. Reports indicate that private equity firms, including some that previously looked at acquiring David Jones, are once again considering Big W. Anchorage Capital Partners is among the names mentioned, along with potential buyers such as Platinum Equity and Oaktree.
The retail industry is undergoing significant change, and Woolworths appears to be positioning itself for a more streamlined and focused future. It remains uncertain whether Big W will find a new owner soon, but signs from Woolworths suggest that a shift is coming quicker than expected.
