The Undeniable Truth That Spells The End Of Kmart
It was the news that had us sobbing after Wesfarmers, the company that own Kmart, were urged to sell the brand in order to save it’s other flagging retailer – Target.
According to broker Credit Suisse, it was the only way their sister store would ever be revived.
AKA… at the expense of Kmart.
The sale of Kmart would give Wesfarmers the ‘flexibility’ to adopt some of those pricing strategies that we have fallen in love with.
"Largely, they have been playing a zero sum game," analyst Grant Saligari told the Sydney Morning Herald.
"A solution to this apparent dilemma for Wesfarmers could be to sell Kmart and, arguably at peak valuation, and then set about trying to fix Target.
"The approach has a reasonable chance of capturing the upside value of both businesses."
For most of us, it just didn’t make sense. Probably because we’re so in love with Kmart.
But when you see these graphs from The Motley Fool, it might make things a little clearer.
Taken from Wesfarmers half year report, it reveals how the $51 billion Australian company’s sales are split up across its brands.
While Coles makes up over 60%, Bunnings, 21.2% and Kmart 9.1%, Target is just a slither in comparison.
This becomes even more apparent when you look at the brands’ pre-tax profits.
With Kmart and Target going head to head for shoppers’ dollars, Target is floundering in comparison.
While there have been attempts to boost the flagging brand, it hasn’t been successful so far.
Hence, the need to take on Kmart at its own game – which means selling.
On the plus side, if Target was successful – it could be good news for us!