Homebase acquisition progressing well.
Wesfarmers has released its retail sales results for the first quarter of the 2017 financial year. Kmart achieved the most significant growth of the group with an 11.2% increase in sales, followed by Officeworks and Bunnings at 7.5% and 7.4%, respectively, while Target sales suffered a 17.1% decline.
Wesfarmers managing director, Richard Goyder said that the sales performance of the group’s retail businesses, with the exception of Target, built on the strong sales growth achieved in the prior corresponding period.
Coles food and liquor sales increased by 2.9%, building on the strong growth achieved in the previous corresponding period. Comparable food and liquor sales increased 1.8% and comparable food store sales increased 1.7% for the quarter.
Coles managing director John Durkan said, “Coles now has approximately 4,000 items on Every Day value as we continue to lower the cost of the weekly shop, and fresh remains a key sales driver as fresh participation growth accelerated through the quarter relative to the prior year.”
“In our food business, we have seen a change in market conditions over the past year. Market growth has slowed, while at the same time there has been an increase in competitive intensity. Depsite these changes in market conditions, our focus on the customer will not waver,” he added.
Coles opened four supermarkets and closed three during the quarter, resulting in a total of 788 supermarkets. Nine supermarkets were renewed during the quarter, with over 50 renewals planned for the 2017 financial year.
Bunnings Australia and New Zealand achieved total sales growth of 7.4% during the quarter to reach $2.7 billion, extending its strong performance despite an impact from the stock liquidation activities of the Masters business.
Sales growth was solid across both consumer and commercial customers. Across many parts of Australia, trading in the quarter was tempered by wetter and cooler weather conditions.
Home Improvement division CEO, John Gillam said the Bunnings business remains focused on creating better experiences for customers, strengthening core activities to improve productivity and driving strong growth.
The first quarter marked the fifth, sixth and seventh months of ownership of the Homebase business and trading continued to be steady. In the United Kingdom and Ireland, sales were in line with expectations at 320 million Pounds ($554 million) for the quarter.
Gillam said the implementation of new pricing, marketing and operational strategies is achieving results in line with plans. On a like-for-like trading basis across the first quarter, customer participation, as measured by transactions, increased by 8.4%.
Kmart recorded strong sales growth of 11.2% to $1.2 billion with a continued focus on lowest prices and the customer experience delivering growth across all categories.
Kmart managing director, Ian Bailey said strong sales momentum continued in the first quarter, supported by double-digit growth in units sold.
“We remain focused on improving the customer experience through further investment in the store network, with over half of all stores now in the renewed format,” he said.
During the quarter, Kmart completed nine store refurbishments and opened one new store.
Target experienced a challenging quarter, with the accelerated conversion to everyday low pricing and the decision to cease the Toy Sale contributing to a 17.1% decline in sales, down to $643 million.
During the quarter, sales were also significantly affected by lower promotional activity and a slower start to summer seasonal sales. Positively, good progress was made to reduce costs, which included improvements in supply chain and store productivity.
Department stores CEO, Guy Russo said that the slowing sales momentum experienced in the fourth quarter of 2016 financial year continued into the first quarter of the 2017 financial year.
“While early in Target’s transition, and despite some progress being made on pricing, inventory and range rationalization, poor underlying trade momentum proved challenging in the quarter. We are committed to converting Target to an Every Day Low Price business and, at this stage of the transition, improvements to product and ranges have not been sufficient to offset reduced promotional activity and investments made in price,” Russo said.
During the quarter, Target made no changes to its store network.
Officeworks sales growth of 7.5% to $461 million reflected strong execution of its ‘every channel’ strategy, with positive sales growth achieved both in-store and online.
Officeworks managing director, Mark Ward said the result was pleasing and continued to build on the strong results achieved in recent years.
“Officeworks will continue to invest in both its store network and online experience, and remains committed to providing customers with a compelling offer and great customer service across every channel,” he said.
During the quarter, one new Officeworks store was opened. Three new stores were under construction at the end of September 2016.