Wednesday, June 19, 2024

Wesfarmers quarter result only ‘generally pleasing’

Wesfarmers Managing Director Richard Goyder has described the sales performance of the group’s retail businesses in the third quarter of FY17 as “generally pleasing given the later timing of Easter”.

According to results released this week, total sales across the businesses for the quarter reached $14.4 billion.

Coles’ headline food and liquor sales increased by 1.2 per cent during the quarter, coming in at $7.6 billion. The Coles petrol business continued to shed fuel volumes and total sales were $1.4 billion

In the home-improvement division, Bunnings Australia and New Zealand achieved total sales growth of 7.7 per cent during the quarter with sales of $2.8 billion. In the UK and Ireland, further progress has been made on transition, separation and integration activities following the Homebase acquisition. The first UK Bunnings pilot store was launched in February, with the second opened on April 12. Both stores are in St Albans, northwest of London.

In the department-stores division, it was mixed news, with Kmart’s total sales increasing 2.5 per cent to $1.3 billion, but Target continuing to concern analysts, recording a decline in total sales of 18.1 per cent during the quarter to $555 million.

Wesfarmers CEO Department Stores Guy Russo said he was confident the rebasing of Target’s business model was complete and pointed to transactions falling at half the rate of sales.

While this sounded ominous, he stressed that 40,000 SKUs had been deleted from range, inventory was down by 15 per cent and a significant number of trading events, such as regular offers involving iTunes and Star Wars products, had been dropped. These events were designed to attract store traffic but were unprofitable.

Coles on long-term journey with low prices

Coles MD John Durkan told analysts of “significant increases in volume of the prices that we drop across the business”.

“It takes time to establish where we want to, in terms of trusted value, and we’ve been on a journey for a long period of time, and we’ve moved from a very mistrusted brand in terms of price to a more trusted brand,” he said.

“When you’ve got a high level of promotions in the market, which is a characteristic of this market, then there’s always a bit of mistrust from consumers. But our aim is to move to more everyday value and less promotional participation, which we’re doing.

“So you’re seeing more everyday low prices, and we will be reducing our reliance on promotions as we do that over a period of time … The price drops in the quarter were all aimed at doing that – providing trust in key categories, so in meat and dairy, some of the biggest categories we’ve got, we are providing trust for our customers.”

Coles is also continuing to invest in service, such as opening more checkouts and adding staff in the fresh-food area.

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