Australia’s Wesfarmers Ltd said on Wednesday it was dropping plans to sell shares in its Officeworks stationary division which it had hoped would raise as much as A$1.5 billion ($1.1 billion), citing unfavourable equity market conditions.The cancellation is another set-back for Australia’s retail sector, which has fallen out of favour with investors amid a sluggish economy and heavy discounting as it tries to compete with new online rivals.The outlook for established domestic players darkened further last month when global retail juggernaut Amazon announced plans to open its online shopfront service in Australia, increasing competition.
“In light of current equity market conditions, Wesfarmers has determined that an IPO of Officeworks at this point in time would not realise appropriate value and would not be in the best interests of its shareholders,” the company said in a statement.
Among its peers, JB Hifi shares are down 15 percent in the past 3 months while Harvey Norman has lost 24 percent. Wesfarmers shares are up 1.8 percent in the period while the benchmark S&P/ASX 200 index has climbed 1.7 percent.
Last week, department store Myer Holdings Ltd said third-quarter sales were down 3.3 percent, while luxury handbags maker Oroton on Tuesday downgraded earnings guidance citing “soft trading conditions”.Earlier this month, Wesfarmers had distributed marketing materials to fund managers about the share offer in what one broker described as a “bull-market set of numbers.”
Wesfarmers purchased the then-struggling office supplies network as part of its A$19.3 billion takeover of supermarket chain Coles. Officeworks’ earnings have nearly doubled in the meantime.