Wesfarmers to Merge Back-end Operations of Target and Kmart

As reported by the Australian Financial Review on Monday, Wesfarmers will combine their Target and Kmart businesses into one singular $10 billion business.

Target and Kmart will ultimately be operated as a single business unit, however both stores will continue to operate under their existing branding. As Ian Bailey (Kmart Group Managing Director) has indicated, Kmart will continue to their price-driven offering and Target will continue to offer affordable apparel and soft home furnishings.

Whilst the announcement came as a surprise, it has been made clear by Mr Bailey that the merger will improve the business’ internal operations and will not result in much of a change to the consumer in stores.

As quoted in the Australian Financial Review:

“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,” he said. “We will run one set of processes. It also means then we have a $10 billion business, which further fragments the cost.

Ian Bailey (Kmart Group Managing Director)

The merger is expected to result in some back-end job losses and appears to be driven by increasing costs and the need to streamline technology to achieve greater operating efficiencies within the business.

Key takeaways from the merger:

  • The back-end operations of Target and Kmart will be merged
  • The merger will create a single $10 billion business
  • Ian Bailey will continue in his role overseeing Kmart Group
  • Kmart CEO John Gualtieri will be the CEO of the merged business
  • Target MD Richard Pearson will be moving into a new role within Wesfarmers
  • It is not expected to have a significant impact on customers

At present there are 124 Target stores in Australia and 323 Kmart stores across Australia and New Zealand.