Coles flat, Target tumbles in Wesfarmers’ update

Coles2Flat food and liquor sales and more tumbling figures for the ailing Target business have countered positive results for Bunnings and Kmart, in Wesfarmers’ third-quarter update.

Coles’ food and liquor sales were near flat in the third quarter, with parent company Wesfarmers citing lower prices in the fight for customers.

The supermarket giant’s food and liquor comparable sales rose 0.3 per cent in the 12 weeks to March 26, down from 4.9 per cent in the corresponding period a year ago.

Coles’ food and liquor sales for the third quarter were $7.6 billion, up 1.2 per cent on the previous corresponding period (pcp). Food and liquor sales for the financial year to date increased 1.9 per cent to $24.6 billion.

“On an Easter adjusted basis, our sales growth in food was broadly in line with the second quarter trend while investment in the customer offer increased during the period,” said John Durkan, MD, Coles.

“It is necessary that we continue to proactively invest in the customer offer throughout this period of lower growth and increased competition to ensure we maintain our market leading customer offer.”

Durkan said the liquor side of the business saw growth in headline sales and transactions, but there “still remains much opportunity for improvement”.

Coles opened six supermarkets and closed one during the quarter, resulting in a total of 796 at the end of the quarter. At the end of the period, Coles had a total of 879 liquor stores and 89 hotels.

Convenience Total Coles Express sales, including fuel, for the quarter1 were $1.4 billion, a decrease of 3.0 per cent on the previous corresponding period, with the impact of lower volumes offsetting continued growth in convenience store sales. Total sales for the financial year to date decreased 8.8 per cent to $4.7 billion. Coles Express continued to expand its network during the quarter, opening five new sites and closing two sites, bringing the total network to 698 sites.

bunnings-uki-st-albans-03-tool-shopBunnings continues domination

It was better news for Wesfarmers home improvement arm, with Bunnings ANZ sales up 7.7 per cent to $2.8 billion for the quarter on the pcp.

Total store sales for the quarter increased 7.4 per cent, while store-on-store growth was 6.0 per cent. For the financial year to date, total sales increased 8.1 per cent to $8.7 billion.

Bunnings’ UK venture saw total sales for the quarter of £245 million ($400 million. For the financial year to date, total sales were £851 million ($1,429 million).

BUKI Managing Director PJ Davis said trading during the quarter was negatively affected by the continued repositioning of its kitchen and bathroom offer.

“The team continues to progress the strategic plan and is focused on building strong foundations,” he said. During the quarter, the first Bunnings Warehouse pilot store was opened. A second pilot site was opened on 12 April 2017 at Hatfield Road, St Albans. There were 254 Homebase stores as at the end of March 2017.

A tale of two departments

In the department stores division, Kmart saw sales up 2.5 per cent to $1.1 billion for the quarter on the pcp. Adjusting for the later timing of Easter in the 2017 financial year, total sales increased 5.5 per cent with comparable store sales increasing 1.6 per cent for the quarter. “Sales were in line with expectations given the later timing of Easter and higher levels of clearance in the prior corresponding period, with more products sold at full price during the quarter,” said Ian Bailey, MD, Kmart.

“Inventory quality has remained strong and positions the business well for the remainder of the financial year.”

Meanwhile, the ailing Target business saw sales decrease 18.1 per cent to $555 million, with comparable store sales down 17.9 per cent.

“During the quarter, the reset of merchandise disciplines was further progressed and the transition to everyday low prices continued, with higher levels of full price sales and lower levels of clearance activity achieved relative to the prior corresponding period,”said Guy Russo, CEO of Wesfarmers’ department stores.

“Trading momentum is expected to remain challenging in the fourth quarter, but reset merchandise disciplines are expected to support improvements in the quality of sales recorded.”

Officeworks total sales for the quarter were $558 million, up 9.0 per cent on the previous corresponding period. The stationery chain said sales for the quarter were favourably impacted by the later timing of Easter. Total sales increased 7.0 per cent to $1.5 billion.

* Coles food and liquor sales rose 1.2 per cent to $7.6 billion

* Bunnings Australia & NZ sales rose 7.7 per cent to $2.8 billion

* Bunnings UK and Ireland sales were $400 million

* Kmart sales rose 2.5 per cent to $1.1 billion

* Target sales fell 18.1 per cent to $555 million

* Officeworks sales rose 9.0 per cent to $558 million

(Source: Wesfarmers trading update for the three months to March 31, 2017)

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