l.com.au/business/wesfarmers-warns-of-more-covid-disruption-after-first-half-profit-dives-202202">Bunnings, Kmart Group, and Officeworks all suffered.
In particular, Kmart Group was hit hard, with earnings down 63.4 per cent during the half.
“What we experienced, particularly in the first quarter, is anything other than a normal operating environment,” Scott told investors.
“It was incredibly abnormal. It was abnormal because the government said we weren’t allowed to let customers into our stores. Our businesses, currently, aren’t set up to accommodate the level of online demand we saw, on top of all the other Covid-19 related challenges that we had to navigate.”
As for the remainder of the year, Scott said performance has so far remained subdued, with fewer customers entering stores due to the Omicron shadow lockdown.
Investors voiced their concerns about the group’s flagging performance through a period where several other retailers are running high above a pre-pandemic average, with one investor pointing to Premier Investments and JB Hi-Fi as examples. However, Scott said he is confident that as conditions stabilise, the group’s ‘lowest price’ approach will continue to resonate with customers – especially should inflation rise.
And, looking forward, Scott outlined a number of opportunities the business hopes to execute on in the coming months.
Club Catch is no more
Earlier this month, online marketplace Catch’s subscription service Club Catch was redesigned, rebranded, and relaunched as OnePass.
According to Scott, OnePass will serve as the basis of a group-wide subscription service similar to Amazon Prime, offering free delivery, members-only pricing, and Flybuys functionality across Wesfarmers’ retail businesses: Catch, Kmart, Target, Bunnings, and Officeworks.
“I should note that the rebranding of Club Catch to OnePass is very much a soft launch [right now],” explained Scott.
“We’ll be testing a number of broader benefits across our group’s businesses with team members prior to launching the offer publicly later this year.”
Catch Group’s growth has somewhat stagnated under Wesfarmers, reflecting a continued investment in growing the business’ technology and data capabilities to strengthen integration with the wider group rather than focusing solely on sales growth.
Wesfarmers is expecting to invest a further $100 million into Catch Group in operational expenses over the next year, setting the foundations of a stronger digital platform for the wider group.
Healthcare arm just a vote away
Additionally, Wesfarmers’ buy-up of health business Australian Pharmaceutical Industries (API) is almost complete, subject only to an investor vote, and Scott outlined the potential benefits this acquisition will have for the business.
API will serve as the basis of a new healthcare arm of Wesfarmers, which will see the business enter the fast growing health, beauty and wellness sectors, powered by Wesfarmers’ retail, distribution and tech knowledge.
“If the vote goes through, we’ll have ownership by the end of March, or early April, so the first focus of growth in that healthcare space will be to invest in and improve the performance of the businesses within API,” Scott told investors.
“[Once we get control of API], we want to spend a bit of time to engage the team there and learn more about the business and opportunities before we get too far ahead.”
However, Scott didn’t rule out expanding the business into adjacent categories, such as pet care, in the near term.
“There are some areas that are logical adjacencies to API. The health, beauty and wellness space is a very broad and rapidly evolving space, so we’ll be able to find some of those opportunities to strengthen that business, capture some of that growth and deliver some returns,” Scott said.
