Target and Kmart are to be united under one department stores division as Wesfarmers announces a new structure and raises Guy Russo to division CEO.
In the wake of weaker than expected overall first-half profit growth, Wesfarmers has created a new department stores division, promoting Kmart managing director Guy Russo to the newly created position of chief executive of department stores. The new division will unite both the Target and Kmart chains under a single management.
Russo has overseen several years of strong profit growth as head of Kmart. It is understood that current Target managing director Stuart Machin will now answer to Russo. Machin is expected to retain his current position until July, when he is reported to be taking on a new senior role with the group.
The new structure comes as Kmart experienced double-digit first half growth, with revenue increasing 12.6 percent year-on-year over the six months through December 2015.
Kmart has been one of Wesfarmers’ strong performers generating revenue of $4.5 billion last financial year, with EBIT margins of 9.5 percent.
Target, on the other hand, is in the middle of a long-term transformation plan designed to improve supply chain efficiencies and reduce inventory. Target generated $3.4 billion last financial year, with EBIT margins of just 2.6 percent.
According to the Australian Financial Review, Target faced significant excess inventory after changes to purchasing strategies didn’t resonate with customers.
Russo is expected to expand his successful management techniques across both department stores, emphasising joint procurement for both Kmart and Target.
According to Wesfarmers, the new structure is about maximising and sharing opportunities across the two department stores.
“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.”