Due to difficult trading conditions.
After just three months in the top position, Wesfarmers managing director, Rob Scott has announced that the group will write down the value of its investment in Target, resulting in a non-cash impairment of $306 million before tax, to be applied against the carrying value of its brand name ($238 million), remaining goodwill of $47 million and property and equipment ($21 million) in the group’s 2018 half year financial results.
Wesfarmers managing director, Rob Scott said, “The impairment of Target reflects difficult trading conditions in an increasingly competitive market. Earnings have stabilised and the business will continue to leverage the department stores structure to support its future performance.”
Despite a decline in sales in HY2018, Target is expected to report earnings before interest and tax (EBIT) of $33 million for the half, representing an improvement of 13.8% on underlying earnings of $29 million in the prior corresponding period.
Given increased levels of strategic co-ordination, a brand-agnostic approach to growing the combined department stores business and the relative materiality of each brand, the financial results of Kmart and Target will be consolidated for reporting purposes from the first half of the 2018 financial year. Sales performance will continue to be reported on an individual brand basis.