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Woolworths cuts jobs, slows store rollout

AAP logoAAP 24/07/2016

Struggling supermarket giant Woolworths is slashing 500 jobs and will incur a charge of $959 million in its full year results as it continues restructuring its operations.

The restructuring costs - part of a five-year turnaround plan, will result in a hit of $766 million to Woolworths' after-tax profit for the 2016 financial year. It now expects earnings before interest and tax to be in the range of $2.55 billion to $2.57 billion.

"Today's announcement demonstrates both the progress we are making and our absolute commitment to act quickly to rebuild the business by doing the right thing by our customers, shareholders, team and suppliers," recently appointed chief executive Brad Banducci said.

Investors cheered the announcement, with shares in the company up $1.15, or 5.1 per cent to $23.60 each, by 1029 AEST.

Woolworths in February unveiled a $972.7 million first half loss - its first in more than 20 years, as it faced declining food and liquor sales amid strong competition from rivals Coles and Aldi, while its failed Masters hardware chain and struggling discount retailer BigW also weighed on its bottom line.

The supermarket giant has also suffered a credit rating downgrade due to its falling market share and as it continues to slash prices.

On Monday, the retailer said it will cut 500 jobs from its support office and supply chain, while a further 1000 will be shifted from the group office into its businesses. The company said it is continuing a review of all back office roles, which could put more jobs at risk.

The group is also separating its struggling Big W and online Ezibuy business and said it is exploring options for selling the latter.

"We have significantly slowed our new supermarket rollout program to focus on renewing our existing stores. We will close some underperforming and non-strategic stores and cancel or defer pipeline stores to allocate more capital to renewing our existing store network," Mr Banducci said.

CMC Markets' chief analyst Ric Spooner said the move signals an increased focus on sales per square metre and return on funds employed for Woolworths.

"A key issue for investors will be whether this is enough to avoid future capital raisings or dividend reductions," Mr Spooner said in a note issued shortly after the announcement.

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