RESTRUCTURE TO COST WOOLWORTHS $1 BILLION

WOOLWORTHS (ASX:WOW) will take a $959 million impairment in FY16 as the company undertakes a restructure and closes underperforming and unprofitable stores.

CEO Brad Banducci, who has been in the role since February, outlined his plan to restructure the business in a statement this morning. It includes cutting 500 jobs from the support office and supply chain, and moving another 1,000 from the group office into the business.

EziBuy has been separated from Big W in a restructure of the General Merchandise business. The company has written $309 million off the value of Ezibuy, which it bought for $306 million in 2013 and will now look to sell. Big W has taken a hit of $151 million.

The company will also slow its new supermarket rollout and will close a total of 64 stores at a cost of $344 million.

"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," says Banducci.

Listing some positives, Banducci says the business has achieved record Voice of the Customer scores, has improving team engagement scores and is achieving continued transaction growth.

As part of the new operating model, sales per square metre and "return on funds employed" will be used as long-term performance indicators.

FY'16 EBIT will be $2.55-2.57 billion.

"While we have had to make some tough decisions and this has ramifications for many of our team, we are confident we are putting in place solid foundations for the future and early results give us confidence we are on the right track.

This will be a three to five-year journey and we are determined to drive sustainable improvements in sales per square metre and Return on Funds Employed to deliver value for shareholders," says Banducci.

WOW is trading steady this morning at $22.45 per share.

It has been a tough few years for Woolworths, following the failure of its Masters business and now EziBuy, in addition to the increased competition from new players, such as Aldi.

WOW has fallen away from its main competitor, Wesfarmers (ASX:WES) in market value in the past two years. WOW hit a five-year peak of $37.74 in April, 2014, while WES has consistently traded around $40 since that time and is today selling for $41.80 per share.