In a strategic shift after the $1.4 billion Myer sale, Coles Myer will form a new everyday needs unit putting its food, bottle shops, petrol and general merchandise businesses under the Coles banner, and separate out two of its best performing businesses, Target and Officeworks.

Australia’s biggest retailer will also change its name to Coles Group Ltd, severing its last ties with the Myer department stores, subject to a shareholder vote later this year.

Coles Myer chief executive John Fletcher said the new set-up, to be carried out over the next 12 months, would simplify the group and drive sales and earnings growth.

“This model is simpler, it’s leaner and faster, it is low-cost and it does look more like world’s best,” Mr Fletcher said.

He said cost savings from combining the buying, operations and marketing of chains such as Kmart, Liquorland and Vintage Cellars, giving them a “common DNA”, would be re-invested back into the frontline.

About $850 million will be spent in the 2006-2007 financial year on expanding and upgrading stores, including rolling out more Target stores in rural areas.

A further $60 million will be used to improve supermarkets, from look, feel and customer service through to new trolleys.

Under the plan, the discount grocer Bi-Lo will vanish, to be replaced by either the flagship Coles or another of the outlets, or be sold off, and NSW liquor bottleshop chain Theo’s will be rebranded as one of its liquor stablemates.

Kmart will eventually adopt the Coles logo, with changes to some of products, including more house brands and fewer auto and hardware items, for which it has faced growing competition from rivals such as Bunnings.

Coles has lagged behind rival Woolworths in the restructure that includes paring back its distribution network to 20 large nodes, with Coles announcing last month that it will close two distribution centres in NSW and Victoria, resulting in the loss of more than 1000 jobs.