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Wesfarmers urged to sell off Kmart

Kmart Store

Credit Suisse retail analysts have urged Wesfarmers to sell Kmart while the store is at peak valuation to avoid suffering at the expense of the planned Target revamp.

Analyst Grant Saligari said in a research note that Kmart, Target and Big W have all experienced ups and downs in the past at the expense of each other, Fairfax reports.

"A solution to this apparent dilemma for Wesfarmers could be to sell Kmart and, arguably at peak valuation, and then set about trying to fix Target," Mr Saligari said. The approach has a reasonable chance of capturing the upside value of both businesses," he said.

Mr Saligari suggested selling Kmart while the company is at "peak valuation" and using the billions of dollars in proceeds to help Target.

At this stage, there is no indication the company is considering this strategy however Wesfarmers shares closed up 11 cents following the report at $43.40. Wesfarmers latest results show there was "strong growth in Kmart partially offset by difficult trading and further restructuring activity in Target."

Wesfarmers also owns Bunnings and twelve months ago completed a high profile expansion into the UK purchasing the Homebase chain.

Source: Insight DIY Team

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27 March 2017

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