Today Wesfarmers announced it has decided to drop its IPO plans for Officeworks, due to poor conditions in the local equity market, including competition from new online arrivals.
Over the past few months Australia’s largest private employer, Wesfarmers, has been doing a strategic review on its stationery supply chain Officeworks, which included a potential initial public offering (IPO) which it hoped would raise as much as $1.5 billion.
The Group today announced its decision not to float off Officeworks, pulling back in light of challenges in Australia’s retail sector and unfavourable equity market conditions.
The withdrawal is just another setback for Australia’s retail landscape, which has seen sluggish investor interest amidst the economic downturn and heavy discounting as it tries to ward off new online rivals.
This outlook darkened further a month ago, following Amazon’s confirmation of setting up its full-fledged service offering here in Australia, increasing the competition.
“In light of current equity market conditions, Wesfarmers has determined that an IPO of Officeworks at this point in time would not realise appropriate value and would not be in the best interests of its shareholders,” said Wesfarmers said in a company statement.
This is in contrast to Officeworks’ strategic announcement earlier this year, in February, when its said: “Officeworks is well positioned for future growth with a strong competitive position and ongoing initiatives to grow its addressable market.”
Retail IPOs in Australia have been under intensified scrutiny as of late, following a series of failures due to digital disruption as well as reduced consumer sentiment. The retail market is pondering the impact of Amazon’s arrival in Australia, which is apparent with Wesfarmers’ IPO decision announcement today.
Other major retail players have also seen the brunt of this, including Harvey Norman who’s shares are down by 24%, and Myer who reported a 3.3% downturn in total third quarter sales, (however online sales were up 36%).