Australia's Woolworths to close MyDeal customer website to cut losses

Australia's largest supermarket chain, Woolworths, will close its majority-owned online retailer MyDeal by the end of September to mitigate operating losses within its marketplace division, citing an intensely competitive environment. This strategic divestment is projected to incur A$90-A$100 million in cash closure costs and A$45 million in non-cash impairment charges, but is expected to significantly reduce the MarketPlus segment's losses from FY26, with MyDeal estimated to contribute A$20 million to the segment's A$65 million FY25 forecast loss. The decision follows Woolworths' A$217.4 million acquisition of MyDeal in May 2022 and reflects broader challenges in the Australian online retail sector, paralleling Wesfarmers' move to cease operations of its loss-making online retailer, Catch.

Analysis

Woolworths is undertaking a strategic restructuring by closing its majority-owned online marketplace, MyDeal, by the end of September to curtail mounting operational losses. This decision reflects a pivot away from a costly M&A strategy, evidenced by the A$217.4 million acquisition of an 80% stake in MyDeal in 2022, which is now being written down with significant one-time costs, including A$90-A$100 million in cash and a A$45 million non-cash impairment. The move is expected to yield long-term benefits by substantially reducing losses in its MarketPlus segment starting in FY26; Citi analysts project the closure will eliminate approximately A$20 million of a forecasted A$65 million loss for FY25. This development, coupled with Wesfarmers' similar decision to restructure its loss-making online retailer Catch, highlights a challenging Australian e-commerce landscape where standalone marketplaces struggle against integrated retail brands and established giants like Amazon, a competitive pressure explicitly cited by Woolworths' CEO.

Key Decisions for Investors

• Investors should view the MyDeal closure as a strategically positive, albeit financially painful, move by Woolworths to improve long-term profitability by exiting a non-core, loss-making asset.
• The parallel struggles of MyDeal and Wesfarmers' Catch serve as a cautionary signal about the viability of standalone online marketplaces in Australia, suggesting investment preference for e-commerce models integrated with established physical retail networks.
• Key monitoring points for Woolworths include tracking the actual cash closure costs against the A$90-A$100 million estimate and validating the projected reduction in MarketPlus segment losses in fiscal year 2026 financial reports.