By Mike Cherney

SYDNEY--Australian conglomerate Wesfarmers Ltd. said Friday that it will reduce the number of Target stores and convert some of them to its Kmart brand as part of an effort to revamp the struggling retail chain.

Wesfarmers said it would convert 10 to 40 large-format Target stores to Kmart, and convert another 52 Target Country stores to small-format Kmart stores. It planned to close between 10 and 25 large-format Target stores and the remaining 50 Target Country stores that aren't suited to Kmart conversion.

The company said it will book pre-tax restructuring costs and provisions to its Kmart Group of 120 million to 170 million Australian dollars (US$79 million-US$112 million) at its full-year result in August due to the store closures. A non-cash impairment of A$430 million to A$480 million before tax will also be recognized, including an impairment to the Target brand name.

"For some time now, the retail sector has seen significant structural change and disruption, and we expect this trend to continue," Wesfarmers Managing Director Rob Scott said. "With the exception of Target, Wesfarmers' retail businesses are well-positioned to respond to the changes in consumer behavior and competition associated with this disruption."

The company plans to implement the changes over the next 12 months, with most occurring in calendar year 2021. Wesfarmers also plans to reduce the size of the Target store support office.

The changes to Target are the result of the first phase of a review of the business, Wesfarmers said. Wesfarmers said it continues to assess its strategic options for Target and that an update will be provided at the full-year result in August.

Employees at converting Target stores will be offered a position at Kmart, and those working at closed Target stores will be given consideration for new roles at Kmart and could be redeployed to the company's other chains, such as Bunnings and Officeworks.

Elsewhere in the business, Wesfarmers said it would recognize a non-cash impairment of A$300 million before tax in its industrial and safety division, primarily related to goodwill. However, it would book a pretax gain of A$290 million on its sale of a stake in Coles Group Ltd., and another one-off pre-tax gain of A$221 million on the revaluation of its remaining Coles investment. Those amounts will also be recognized at the August result. 



  Write to Mike Cherney at mike.cherney@wsj.com