Some Woolworths stores in Sydney, Melbourne and Brisbane could be facing an uncertain future – including some of its most modern CBD stores – as the supermarket struggles with a Covid-19 fuelled exodus from city centres.
On Wednesday, the retailer announced to the ASX that it was writing down the total value of at least 13 of its Metro branded smaller supermarkets located in CBDs and transport interchanges by $50 million.
Metro stores feature a reduced range, often without delis, with a focus on food to go, sandwiches and salads and with each store having its own coffee shop. Metro currently makes up around 80 of Woolworths’ 1000 plus stores.
Three of those 80 stores have already shut with a further 10 now under “review”.
While there were “no plans for immediate closure” of the 10 stores, Woolworths did not indicate whether the branches would remain open over the long term.
“Sales in these locations (CBDs and transit hubs) have been, and remain materially negatively impacted by covid,” the firm said in a statement.
“While the group remains committed to the Metro food stores, it will record a non-cash impairment change of approximately $50 million in relation to store and lease assets.
“This impairment charge reflects a balanced view of the speed of recovery of CBD and transit customer movements and the likely impact of this on Metro stores.”
Data from Roy Morgan has found movement in every major CBD in May was below half that of pre-pandemic levels.
Lockdowns in Melbourne have seen the CBD struggle but even in Sydney only around a third of the people are travelling in and around the city centre compared to 2019. Brisbane is sitting at 40 per cent.
Woolworths has closed three of 13 stores under review
Woolworths Group CEO Brad Banducci said Metro stores in the suburbs were faring better.
“Most Metro stores are in locations that have not been impacted by the reduction in customer foot traffic and continue to perform well, including new look neighbourhood stores recently opened in suburban Sydney”.
Over the past few months, Woolies has closed three Metro stores. A store in Melbourne Central shopping centre was shuttered along with supermarkets in the Sydney suburbs of Castle Hill and Manly.
The Woolworths Metro in Manly, in the heart of the busy Corso, closed in February just a year after opening.
It’s understood the huge drop in tourist numbers to the Sydney seaside suburb affected trade at the store as well as fewer people catching the iconic Manly Ferry to work and the presence of two refurbished full sized Coles within metres of the store.
And a new concept, one-aisle “MetroGo” store in Sydney’s Surry Hills which didn’t accept cash closed when the pandemic began.
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Many Metro stores in CBDs
Woolworths did not reveal which 10 stores are currently under review, but they are understood to be chiefly in the CBDs of Australia’s three largest cities.
In and around Brisbane, Metro stores are located on Ann St by Central station and Tank St as well as Fish La and Southpoint in South Brisbane.
Melbourne has a number of CBD Metros including on Swanston St, Literature Lane, Little Collins St, Elizabeth St, Flinders St, Bourke St, Southern Cross station and Collins Square in Docklands.
Sydney has Metros close to Wynyard and Central stations, York St, Chinatown, Central Park and Woolloomooloo with further stores in the CBDs of North Sydney and Parramatta.
Each of the CBDs also has at least one full sized Woolies including the historic Sydney Town Hall store which once housed Woolworths’ head office. It’s understood these stores are not part of the review.
Woolies opened a flagship Metro store on Sydney’s Pitt St Mall, reportedly the strip with the third highest rents in the Asia-Pacific region, in July 2018.
Alongside everyday essentials, it boasted an instore kitchen dishing up everything from piping hot roast dinners and red curries to poke bowls and bespoke salads to hungry office workers, shoppers and tourists.
“If you come into the city wanting lunch at the moment, you have to queue up at a food court but we have an offer that’s significantly cheaper,” Steve Greentree, the then Woolworths’ Metro managing director told news.com.au at the time.
“We used to use a supermarket once or twice a week. What we’re building with this store is somewhere we serve you three times a day”.
But since Covid hit, much of the kitchen offer has been closed off. Along with other CBD Metro stores, the Pitt Street branch had some fridges and freezers shut down for a time due to the fewer number of shoppers.
“We have no plans for immediate Metro store closures at this time. The impairment booked today reflects the reduction in value of these stores and lease assets,” a Woolworths spokesman told news.com.au.
“Three of the 13 stores are currently closed and we’re reviewing our options across the remaining 10 sites.”
Metro ‘remans a strong brand’
The company has insisted the fundamentals of the Metro concept remain sound.
“We still plan to open around 30 new Metro stores over the next three years, with a bias towards our neighbourhood food stores, which are performing well,” the spokesman said.
“Woolworths Metro remains a strong brand and we’ll continue to invest in it.”
Indeed, the retailer is pushing to open a store in the posh Sydney suburb of Mosmandespite opposition from some residents.
Early Metro stores tended to be on the small side. But many newer openings have been significantly larger albeit below the size of a large shopping centre store and with most lacking a deli.
In the past three months, Woolworths has opened suburban Sydney Metro stores in Granville and Bronte along with Blackrock in Victoria, Fortitude Valley on the Brisbane CBD fringe and in the centre of Newcastle.
Woolworths may be semi-retreating from CBDs but Coles appears to be doing the reverse.
In recent weeks it opened a Coles Local store, a similar concept to Metro, overlooking George St in the heart of Sydney.
IGA franchisee Romeo’s Group has also opened one up-market supermarket on King St in Sydney’s CBD and has another underway at Wynyard station. Those supermarkets are so fancy they even have instore bars and bistros.
Woolworths’ write down of the clutch of Metro stores comes after David Jones announced the winding down of its BP partnership.
Last month, the department store said it would exit 35 BP petrol stations where David Jones Food branded outlets sold ready meals, sandwiches and chilled food.
In March, the company announced it would close its only two stand-alone DJs food halls, both in Melbourne.
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