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Diversified industrial, health and retail group Wesfarmers (ASX: WES) is planning to shelve its e-commerce arm Catch as a standalone business, merging its under-utilised warehouse operations with Kmart in a bid to stem losses from the division.
Catch, which was acquired by Wesfarmers for $230 million in 2019, has struggled with profitability from the outset with the business reporting a $96 million loss before tax in FY24 – down from a $163 million pre-tax loss a year earlier.
In an effective winding down of the brand from the fourth quarter of this financial year, Wesfarmers plans to share the business across its divisions with Catch’s e-commerce fulfilment centres being transferred to Kmart Group and some of Catch’s digital capabilities transferred to Wesfarmers’ retail divisions which include Kmart, Target, Officeworks, Priceline and Bunnings.
“While Catch’s financial performance has been challenging, we have gained valuable insights and capabilities that have accelerated the group’s digital transformation and supported the development of the OnePass membership program,” says Wesfarmers’ managing director Rob Scott.
“Since the acquisition of Catch in 2019, Wesfarmers’ retail divisions have significantly enhanced their data and digital operations, recording more than $3 billion in e-commerce sales and 220 million monthly digital interactions with customers in the 2024 financial year.
“Wesfarmers’ retail divisions currently represent the largest non-food, omnichannel retail group in Australia.”
Scott says a surge in competition within the Australian e-commerce sector in recent years has impacted Catch’s financial performance and its growth prospects. While Scott does not identify the competition, recent data shows that Chinese e-commerce platform Temu last year overtook eBay in terms of market share by pure online retailers in Australia.
“In this environment, the group’s retail and health businesses, with their leading omnichannel offerings and trusted brands, are better positioned to respond as the market and customer expectations evolve,” says Scott.
“These businesses are supported by extensive store networks, leading e-commerce platforms, the group’s shared data asset and complementary loyalty and membership programs, including OnePass.
“Together, these elements provide the opportunity to cost-effectively scale the group’s customer propositions, helping create shareholder value.”
While Wesfarmers has not indicated the number of job losses expected from the transition, Catch team members are being redeployed within the group “where possible”.
Catch has two e-commerce fulfilment centres - at Moorebank in NSW and Truganina in Victoria - both of which will be transferred to Kmart Group from the June quarter of this financial year.
“Kmart Group can better utilise Catch’s fulfilment centres, which are currently less than 50 per cent utilised,” says Kmart Group managing director Ian Bailey.
“The transition will result in faster deliveries to customers at a lower unit cost, while relieving pressure on our busy stores.”
Wesfarmers expects the move to have a positive, although immaterial, impact on Kmart’s earnings in FY26, adding that benefits will increase as online sales grow.
The wind down and transition of Catch will lead to a write-down of between $50 million and $60 million on Wesfarmers financial result in FY25, in addition to another trading loss for the division.
Catch currently sits within Wesfarmers’ One Digital division which includes the group’s OnePass membership program.
The group says the operating loss for OneDigital, excluding Catch, is expected to be about $70 million in FY25, in line with previous guidance.
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