Wesfarmers, owner of Target and Kmart, has revealed a major restructuring of the two chains, shutting up to 75 Targets and converting a further 92 in Kmart stores.

In an announcement to investors on Friday morning, Wesfarmers said the restructure was essential to reducing Target’s unviable cost base due to its consistent underperformance.

Somewhere between 10 and 40 large format Target stores will convert into Kmarts, while another 62 Target Country Stores will be converted into small format Kmart stores.

The remaining 50 Target Country stores will close, while 10 to 25 of Target’s large stores will shut. This means a total of between 122 and 167 Target stores will either be shut or converted into Kmart stores.

The restructuring will roll out of the next year and will cost Wesfarmers between $120 million and $170 million, and write down the value of assets in the division by $430 million to $480 million.

As a result of the underperforming Target stores, Wesfarmers will also take a hit of up $950 million in the 2020 financial year.

Wesfarmers chief executive Rob Scott said: “The actions announced reflect our continued focus on investing in Kmart, a business with a compelling customer offer and strong competitive advantages, while also improving the viability of Target by addressing some of its structural challenges by simplifying the business model.

“While accounting standards require us to recognise an impairment of assets within Target to implement the restructuring, these actions will allow us to enhance the overall value of Kmart Group and further strengthen Kmart.”

Staff affected by the closures will be offered jobs at Kmart or given other employment across the Wesfarmers portfolio.