Investors call for Woolworths to sell off Big W, NZ division

Investors are urging Woolworths to sell off its New Zealand business and discount chain Big W to simplify operations and boost sales growth in its home market.

The action came as Woolworths has been losing to its local rival Coles in terms of sales over the past 12 months.

Ray David, a portfolio manager at Blackwattle Investment Partners, told The Australian Financial Review that Woolworths’ New Zealand supermarkets had not performed well, with earnings down 57 per cent in the year ended June 30.

“We are advocates of simpler leaner business, as sometimes the essence of strategy is choosing what not to do, and we would welcome any strategy that simplifies the business that brings a greater focus on the core,” added David.

Last year, Woolworths announced its $370 million investment in rebranding its New Zealand business, previously known as Countdown. The company has so far expanded to 200 locations in the country.

First Sentier Investors portfolio manager Dushko Bajic, who shares similar opinions, suggests the supermarket giant should also divest Big W as the business has been “destroying” capital. The discount chain, which competes with Kmart and Target, has only reported a profit twice over the past decade, he added.

Bajic believed the company should reinvest in its local arm and prices and make the most of its local supermarkets, according to the AFR.

The investor added he had made his point during a recent meeting with the new Woolworths CEO Amanda Bardwell, who officially took the title this month to replace Brad Banducci.

Several other investors said they had made similar suggestions to Banducci in the past, but the former chief told them that the poor economic conditions would make it hard to find a buyer.

Woolworths’ Australian business accounts for approximately 88 per cent of the company’s earnings, but sales at its local supermarkets has increased only 1.8 per cent in six months, compared with the 5.2 per cent at Coles.

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