Wesframers has written down the value its discount retail chain Target by $306 million after lower than expected sales for the first-half of the 2018 financial year.
The impairment will be applied against the brand name ($238 million), remaining goodwill of $47 million and property and equipment ($21 million).
“The impairment of Target reflects difficult trading conditions in an increasingly competitive market,” says Wesfarmers Managing Director Rob Scott.
“Target’s earnings have stabilised and the business will continue to leverage the Department Stores structure to support its future performance.”
Wesfarmers in May 2016 booked a non-cash impairment of $1.3 billion in Target.
Target, despite a decline in sales in the first half of 2018, is expected to report earnings before interest and tax of $33 million, an improvement of 13.8%.
“Target has made good progress to improve its financial performance and the impairment follows the continuation of difficult trading conditions in an increasingly competitive market,” says Scott.
Wesfarmers says the financial results of Kmart and Target will be consolidated from the first-half of the 2018 financial year. Sales performance will continue to be reported for each brand.