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Bunnings UK drags on Wesfarmers as Coles’ sales slow

Bunnings pilot stores in the UK have encouraged Wesfarmers’ management

Bunnings UK continues to drag on Wesfarmers, while Coles supermarkets sales growth has slowed in the conglomerates first quarter update.

Kmart, Officeworks and Bunnings Australia and New Zealand continue to be the star performers for the retail giant, while struggling discount department chain Target saw revenue decrease again.

Coles food and liquor sales for the first quarter were $7,968 million, up 1.5 per cent on the prior corresponding period. Comparable food and liquor sales increased 0.4 per cent and comparable food sales increased 0.3 per cent for the quarter.

Coles managing director John Durkan said excluding the impact of the significant fresh produce deflation, food and liquor comparable sales in the first quarter were broadly in line with the trend achieved in the 2017 financial year.

“As we outlined at our full year update in August, we continue to proactively invest in value, quality, availability and service for our customers,” he said.

“We believe our focus on a customer-led strategy will ensure Coles maintains its strong market position in a highly competitive market, and will deliver sustainable long-term growth,” added Durkan who said there stil remained “many opportunities for growth” in the business.

Coles opened one supermarket and closed four during the quarter, resulting in a total of 798 supermarkets at the end of the period.

For its Convenience division, Coles Express sales, including fuel, for the quarter were $1,402 million, a decrease of 9.5 per cent on the prior corresponding period, largely impacted by lower fuel volumes.

UK struggles

Bunnings United Kingdom and Ireland (BUKI) sales dropped 13.8 per cent to £276 million ($457 million), on the prior corresponding period. Store-on-store sales decreased 11.9 per cent.

“While the performance of Homebase is disappointing, we continue to be encouraged by the performance of the Bunnings pilots,” said Michael Schneider, MD, Bunnings Group.

“The BUKI team remains focused on stabilising the performance of the Homebase stores as well as delivering proof of concept for the Bunnings format,” Schneider said.

There were 244 Homebase stores and eight Bunnings stores as at 30 September 2017. A total of 15 to 20 pilot stores are expected to be either trading or nearing completion by 31 December 2017, subject to relevant approvals.

Closer to home, Bunnings Australia and New Zealand (BANZ) sales for the quarter were $2,964 million, 11.5 per cent above the prior corresponding period. Total store sales for the quarter increased 11.7 per cent, while store-on-store growth was 10.8 per cent.

Wesfarmers said the result built on total sales growth of 7.4 per cent in the prior corresponding period, which included adverse impacts from wet weather and the stock liquidation activities of the Masters business.

Schneider said the results were pleasing and continued to be supported by a strategic agenda focused on driving growth, creating better experiences for both customers and the community, and strengthening the core of the business. “Continuing to deliver on this strategic agenda will support ongoing growth for the BANZ business,” said Schneider.

Following Home Consortium’s acquisition of failed hardware rival Masters, Bunnings will convert and open stores at six of the sites.

In the department store division, Kmart continued to perform strongly with sales of $1,361 million, an increase of 9.0 per cent on the prior corresponding period, with comparable store sales increasing 4.9 per cent.

Target continues decline

Kmart MD Ian Bailey said the sales performance achieved in the first quarter was driven by strong unit and transaction growth as customers responded positively to the combination of further price investment and improvement in the product offering.

“Maintaining price leadership in a market that is becoming increasingly competitive remains core to Kmart’s strategy and is expected to support the continued growth of the business,” Bailey said.

During the quarter, Kmart completed 11 store refurbishments, opened two new stores and closed one store. Kmart Tyre and Auto opened one centre and closed one centre during the quarter.

However it was a different story for discount department store chainTarget, who saw sales decrease 6.4 per cent to $602 million.

Department stores CEO Guy Russo said Target’s sales performance for the period reflected the continued reset of product, price and range, particularly across womenswear, toys and general merchandise. “During the quarter, the significant transition to deliver quality and fashion at low prices continued,” Russo said. “

Merchandise disciplines were further progressed, delivering SKU reductions, lower levels of inventory and increased levels of direct sourcing.” During the quarter, Target opened two new stores and closed one store.

Officeworks sales for the quarter were $497 million, up 7.8 per cent on the prior corresponding period.

“Officeworks continues to invest in both its store network and online offer, both as stand-alone channels and as part of an every channel proposition,” said Mark Ward, Officeworks MD.

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