Kmart to keep name in NZ, says owner

Four years ago Kmart was struggling to face up to competitors such as The Warehouse. Picture / Sam Ryan

Kmart will keep its name in New Zealand despite changes at the discount department stores across the Tasman, owner Coles Myer said yesterday.

Coles Myer, Australia's second-largest retailer, plans to drop the Kmart brand from its general merchandise stores as part of an A$910 million ($1.13 billion) revamp next year.

It will then bring its businesses under the one Coles brand in a bid to increase its 35 per cent share of Australia's A$70 billion-a-year market for food, liquor and groceries.

The company said yesterday that the name would remain at its 13 New Zealand stores, but did not rule out a change to Coles in the longer term.

"Over time, every format within the everyday needs business will in some way reflect the new Coles brand," it said.

Macquarie Equities investment director Arthur Lim said while rebranding the Australian stores made good business sense, the Kmart name was better in New Zealand where Coles was unknown.

"Until such a time as Coles has a bigger presence here," Mr Lim said.

Confirmation of Kmart's continued presence in New Zealand implied it had recharged its batteries since four years ago when Coles tried to offload the business which was struggling to match up to The Warehouse and Farmers.

It came close to selling the 11 stores it then owned to The Warehouse in 2001 but a deal was never reached.

Although Coles does not comment on profits in New Zealand specifically, Mr Lim said Kmart now appeared to be holding its own.

Having made the decision to stay, the chain would be looking for the best way to leverage the business here.

Mr Lim also believed that New Zealand's discount retailing industry was due for some consolidation in the short-term.

"We have a situation whereby The Warehouse's move into grocery is prompting moves by Foodstuffs, for example, to look at how to position themselves into that space.

"In the face of those kind of moves I don't see any new entrant into the industry.

"If you take Kmart as an example, finding locations is difficult. The more logical way for them to grow is through acquisitions and that's easier said than done."