The $230m Catch of the Day for Kmart
Announced today by Wesfarmers the Catch Group which was only acquired in 2019 for $230m will cease to trade as a standalone operation business in the fourth quarter of the 2025 financial year with around 190 jobs to be lost. Wesfarmers Managing Director Rob Scott said the decision was in the best interests of shareholders and would better leverage the assets and capabilities developed within Catch. Catch is expecting an operating loss of $40m for the first half of the 2024-2025 financial year and this is on top of the mounting losses since 2021. If you are just looking at the numbers it’s probably a relief to the board to get out of this business and go back to doing what Wesfarmers is good at which is traditional bricks and mortar with a sprinkle of ecommerce.
“The decision was in the best interests of shareholders and would better leverage the assets and capabilities developed within Catch” Wesfarmers Managing Director Rob Scott.
Founded by the Leibovich brothers Gabby and Hezi back in 2006 Catch or CatchoftheDay was one of those shining lights, that annoying website were you would get sucked into some crazy bargain on something that is never discounted and that will never be discounted again, an offer too good to be true, it was truly awesome. You need to remember this was before Amazon, Temu and the rest. Fast forward to 2019 Catch gets sold to Wesfarmers for $230m a 13x EBITDA which seems excessive but at the time it was seen as a strategic move by Wesfarmers to compete with Amazon without having to start from scratch, they had an extensive supply chain operation, loyal customer base, great brand reputation and could really support the growing ecommerce needs of Kmart and Target but that all disappeared in less than 5 years, the writing was probably on the wall as early as FY2021 when every man, women and child seemed to be buying big online and Catch lost $24m and then a further $88m in FY2022.
Once the dust settles the winner will be Kmart Group as Catch’s dedicated e-commerce fulfillment distribution centres will be transferred to Kmart Group in the fourth quarter of FY2025. There are two DC’s with some sophisticated automation in place, back in 2020 Catch Group rolling out the largest deployment of autonomous mobile robots in Australia and New Zealand at their Melbourne DC which had the ability to pick an additional 2,000 orders an hour but obviously they didn’t need so many AMR’s as those volumes were never achieved maybe they got a crazy bargain, an offer too good to be true.
Kmart Group Managing Director Ian Bailey said the transfer of Catch’s fulfilment centres builds on the successful partnership between Kmart and Catch.
“Kmart Group can better utilise Catch’s fulfilment centres, which are currently less than 50 per cent utilised. The transition will result in faster deliveries to customers at a lower unit cost, while relieving pressure on our busy stores.” Ian Bailey Managing Director Kmart Group.
Wesfarmers expects to record one-off costs associated with the wind down and transition of Catch of between $50 million and $60 million, to be included in the results for the second half of the 2025 financial year. This amount does not include the operating losses Catch will incur from trading in the second half of the 2025 financial year. The expected one-off costs include approximately $25 million to $30 million of non-cash costs.
