Management Accounting Analysis of Big W Store's Financial Issues

This report analyzes the management accounting issues faced by Big W, an Australian retail chain, as of 2019. The report highlights the company's financial struggles, including store closures, declining sales, and significant losses. The analysis focuses on the causes of these problems, such as market share loss to competitors, the shift to online shopping, and high operational costs. It examines the impact of strategic decisions, like restructuring and supply chain issues. The report also discusses potential solutions, including improving product flow, reducing markdowns, and focusing on gross margin improvements. The analysis draws upon an article from the Australian Financial Review and incorporates relevant management accounting concepts and techniques to understand the challenges faced by Big W and provides recommendations for improvement. The report concludes with a discussion of the company's future outlook and the need for strategic adjustments to address the evolving retail landscape.

Running Head: MANAGEMENT ACCOUNTING
MANAGEMENT ACCOUNTING
Name of the Student
Name of the University
Author Note

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Table of Contents
Memorandum.............................................................................................................................2
Reference....................................................................................................................................5

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Memorandum
To- Board of Directors
From-
CC-
Date-
Subject- Management Issues regarding Big W stores losses
The aspects of issues of the management are analyzed to assists board of directors of Big W
stores in order to focus on operations of organization. The management accounting issues
assist company’s management to use the provisions of accounting infor6mation. This help in
providing better information to the management for deciding regarding matters as well as
concerns, which is within the firm for aiding towards the managerial functions as well as
performance of the organization. The article, which is published on April 1, 2019, has
highlighted certain serious concerns of managerial issues faced by the Big W stores.
Big W is the chain of the discounted departmental stores of Australia that was founded in the
year 1964 in the regional New South Wales. This company is the division of the Woolworths
Limited. It operates 182 stores with the number of employees around 22,000, which is across
Asia as well as Australia. The group of Woolworths Limited has developed the brand of Big
W for providing the Australia Shopper with the broader ranges of the products of general
merchandise in the dedicated one-stop shop. The name of Big W reflects complementary
relationships with the Woolworths Supermarkets. However, the letter W here does not
represents Woolworth rather it symbolizes warehouse that is adopted from the bargain
basement warehouse of Woolworths.

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The article in relation to Big W store has highlighted the concerns regarding Woolworth
being forced for taking harsh decision on their retail division Big W stores. Article mentions
that the shareholders of the Woolworths are paying heavy price for the failure of board for
face the situation on the Big W after the discounted departmental store chain has started
struggling around three years ago. In the year 2019, Woolworth’s group would book the
amount of $370 million in the one-off costs after they have taken decision regarding closures
of thirty stores of Big W as well as two centres of distribution. There would be loss of around
more than 1000 jobs. The closures of Big W thirty stores as well as two distribution stores
includes Monarto in the South Australia that has employed around 212 people as well as
Warwick in the Queensland that has employed around 183 people. All these would be closed
at the completion of their leases in the year 2021 as well as year 2023.The costs of one-off is
consists of $270 million in which $250 million is in cash for exit the leases before the
redundancies, expiry as well as costs of other closures of store. There would be booking of
around $100 million of the non-cash impairments of cash by the Woolworths Group. It
reflects conservative margins of Big W, after it takes into account the current as well as
future trading as the customers shift to the online shopping and the rise of the costs such as
home deliveries.
These charges are the result of restructuring as well as impairments costs of $151 million in
the year 2016 after the closure of five stores as well as impairments of $35 million in the year
2017. It has been understood that the former managing director of Big W director Sally
Macdonald wanted for performing the major changes, for instance closing the stores, taking
discounter more up market as well as restructuring of the supply chain. Hence, it was the
major problem because the former managing directors plans was considered as too ambitious
by the board of Woolworth and as a result of which Sally Macdonald has to step down right
after the year in job.

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For the various unsuccessful turnaround plans as well as losing the share of market to the
Kmart, the company has managed for gaining the momentum with rising of the sales by 6 per
cent in March quarter and after the growth in December quarter in 5 per cent. It was
underpinned by the strong growth of transaction. However, Woolworth Group has expected
that despite of the rise in the sale for more than the amount of $3.5 billion, the Big W chain
would be losing another amount of $80 million to $100 million in 2019, taking into the losses
over last four years to the total of $375 million. Brad Banducci, the chief executive of the
company stated that closures of these stores represent about 16% of the 183 stores of Big W.
Moreover, the analysts have the view that Big W would be taking several years before break
even by the company. The other analyst such as Credit Suisse has the view that Big W needs
to work a lot for their expectation of being break evenish in the year 2021.
However, the company’s chief executive stated that the biggest opportunity that is available
for Big W, after the closure of their worst performer stores was to boost the gross margins by
the help of reducing the requirement of mark down the unsold stocks. Moreover, these issues
of Big W would also be resolved with the help of right flow of the stock at the right store and
on the right price. Further, price cannot be hold entirely responsible for the closures of the
stores. Getting the flow of product would be materially reducing the amount of the end of the
season clearances as well as markdowns. The company is having the view that Big W is open
for sale but it would not be deviating from their current focus of the company. They will not
be saying which of the store will be closed until and unless there is completion of the
negotiations with the landlords as well as they would be finding jobs for the staffs of Big W
in other possible divisions in group.
Therefore, the company Big W store requires restructuring, which could be possible by
increasing the flow of products at right time in right store and they need to focus on the
increasing overheads costs.

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Reference
Australian Financial Review. 2019. Woolworths finally bites bullet on Big W. [online]
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