The Wesfarmers Ltd (ASX: WES) share price is in focus today, and up 1%, after the company announced the end of Catch.
Catch was an online-only retailer that Wesfarmers bought in 2019.
Wesfarmers to end Catch
The company said Catch will cease to trade as an operating business in the fourth quarter of FY25.
Catch’s e-commerce fulfilment centres in NSW and Victoria will be transferred to Kmart Group, while “select digital capabilities” developed in Catch will be transferred to Wesfarmers’ retail divisions.
Wesfarmers said this will eliminate the losses that Catch makes and strengthen the ability of Wesfarmers to sell through a variety of channels.
The company noted it has gained “valuable insights and capabilities” from Catch, which have accelerated the group’s digital transformation and supported the development of the OnePass membership program.
Wesfarmers said its retail divisions currently represent the “largest non-food, omnichannel retail group in Australia”.
One-off costs in FY25 are expected to be between $50 million to $60 million, not including the operating losses Catch will incur in the second half of FY25. Catch is expected to report an operating loss before tax of between $38 million to $40 million for HY25. The consistent losses haven’t been useful for the Wesfarmers share price.
Why did this happen?
The Wesfarmers Managing Director Rob Scott explained:
The recent increase in competitive intensity in the Australian e-commerce sector has affected Catch’s financial performance and growth prospects. 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. 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.
Catch’s facilities are currently being utilised at less than 50%, so it’s expected Kmart Group can better utilise these. It should result in “faster deliveries to customers at a lower unit cost, while relieving pressure” on busy stores.
The transition is expected to be positive but not have a major impact on Kmart Group in FY26, with “benefits expected to increase as online sales grow”.
OneDigital update
Wesfarmers said its shared data asset, including more than 12 million customer records, is enabling the company to better understand customers, improve personalisation and identify cross-shop opportunities.
OneDigital is going to focus on accelerating the development of a group retail media network, including investment in shared systems, data and sales capabilities to commercialise retail media across the retail and health divisions.
The operating loss for OneDigital, excluding Catch, is expected to be approximately $70 million for FY25.
Final thoughts on the Wesfarmers share price
I think Wesfarmers is one of the best businesses on the ASX. It’s a shame that Catch didn’t work, but I can see how much of a benefit this would be for Kmart Group to utilise those facilities. It’s interesting this move comes soon after the company sold another of its businesses.
In the longer-term, Wesfarmers’ online capabilities will become increasingly important. It’s probably the right move if Catch is going to keep making losses and the distribution centres would help Kmart.
I’m not sure it’s a great buy after a strong rise in the last year or so, I’m not expecting a big rise this year. I’d be happy as a long-term shareholder, but there could be better ASX dividend shares out there.
