CFO World

Kmart and Target to be united under one department stores division

Wesfarmers says new structure is about maximising efficiencies and opportunities across the two department stores

Wesfarmers is uniting its Kmart and Target brands under a new department stores division, and has appointed current Kmart managing director, Guy Russo, as its chief executive.

The ASX-listed retail group’s new structure was revealed during its half-year financial results today, and also comes after Kmart experienced double-digit sales growth. Kmart reported a 12.6 per cent increase in year-on-year revenue to $2.7 billion in the six months to 31 December 2015, and a 10.5 per cent rise in EBITDA to $368m.

According to Wesfarmers, the new department stores model is about maximising and sharing opportunities where appropriate across Kmart and Target, while maintaining and growing both brands. It’s also a reflection of the support Kmart’s leadership team has gained within the wider Wesfarmers business.

Russo has been with Kmart since 2008 and took over as managing director of Kmart in 2010, leading a transformation of the low-cost retailer that has seen sales volumes double and profit growth soar.

Reporting to Russo in his new role will be current Target managing director, Stuart Machin, who retains his position until July, when he is expected to take on a new senior role in the group. Wesfarmers has also promoted Kmart’s chief operating officer, Ian Bailey, as the brand’s new managing director.

In addition, Kmart’s finance director, Marina Joanou, will be promoted to finance director across the department stores division.

“This is the right time to draw together some functions of the individual businesses to ensure we get maximum reward from the strong work that has been undertaken in both,” said Wesfarmers managing director, Richard Goyder.

“The newly formed division will allow streamlined coordination of functions, where it makes sense to do so, such as in property, finance and corporate affairs and sustainability.

“Individually, both Kmart and Target have been through challenging times since we acquired them in 2007. Kmart was in very poor shape when we took ownership, but Guy Russo, Ian Bailey and their team have done an outstanding job and the business has been trading very strongly for several years.”

Target has struggled with customer relevancy along with a raft of operational inefficiencies, and has been undertaking a transformation program over the last three years. Goyder highlighted improvements in ecommerce, sourcing, ranging, supply chain and operational productivity, as well as the launch of a new store format, as milestones on the path to positive footing and future growth.

In its financial results for the first-half, Target reported a 1.9 per cent rise in revenue to $1.97bn, and 6.3 per cent rise in EBITDA to $119m.

“The strong work by Guy, Stuart and their respective teams has allowed the group to pursue this option when previously it just wasn’t feasible to do so,” Goyder added.

CMO can also reveal Target brought on new marketing director, Kenton Elliot, in December. Elliot replaces former marketing leader, Phil Wade, and was previously the global strategy and innovation director for Johnnie Walker at Diageo.

A spokesperson confirmed that Elliot's position, along with that of Kmart's GM of marketing, Michelle Teague, remains unchanged.

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