Kmart and Target combine in $10b merger

Designed to boost profits, Wesfarmers has announced a move that will see Kmart and Target merge into a single business. Wesfarmers, which owns the brands alongside Bunnings, Priceline, and Officeworks, announced the news to staff on Monday with AFR reporting it publicly later in the day.

The changes are set to be made to back end operations with the two stores continuing to operate as separate consumer facing stores and have no impact on retail floor staff. Kmart Group MD Ian Bailey told the AFR that the company would see some movements behind the scenes including a “handful of redundancies”, mostly in technology and merchandise.

“We will end up with more jobs in the business a year from now,” said Mr Bailey.

“Kmart and Target are both strong businesses. I don’t see us doing this from a position of weakness. It’s quite the opposite. I’d say we’re strong, but I think there’s an opportunity to really capitalise on this time and find ways to continue to deliver better value for customers.

“What we found was that running two businesses it was very, very difficult to get the tech into Target, and to get those benefits. This is really why we decided to push the two businesses into one.”

Management movements behind the scenes include Target MD Richard Pearson moving to a new role as Retail Director within Wesfarmers’ health unit leading the strategy and operational side of the division, including its Priceline chain and loyalty program.

AFR also reports that Kmart CEO John Gualtieri will run the combined Kmart and Target stores day-to-day. Group CFO Aleks Spaseska will be taking on international supply chain, sourcing and property, and KAS Services India Director Arjun Puri will focus on Kmart’s home brand, Anko, and head its international expansion push. Kmart CIO Brad Blyth will continue to lead technology including Target’s migration to one set of systems as part of this change.

By folding Target into Kmart, the combined conglomerate will be worth $10b.

“This change enables us to push the same technology into Target because we will get to a point when we will have one technology stack,” Mr Bailey told AFR. “We will run one set of processes. It also means then we have a $10 billion business, which further fragments the cost.

“So you can see how all of this plays into our productivity improvement.”

“I see value being really front and centre for a long time,” he concluded. “What we’re seeing is when we can consistently hit good products at great prices, then there’s plenty of demand out there.”

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