Silly short term investors wasted a fair bit of money selling Wesfarmers (WES) shares in the wake of what some optimistic analysts claimed were disappointing figures in yesterday’s quarterly update.
The shares fell to a day’s low of $41, a fall of more than 2% or 87c in the wake of the early morning release of the September quarter figures.
But cooler, better informed heads stepped in and by the close of trading, Wesfarmer’s shares were only off 8c at $41.92.
The wider market was up 16 points, so Wesfarmer’s rebound was solid as sensible investors looked at the quarterly report and concluded it was OK.
If anything, the market reaction came from knee jerk day traders who reacted to talk from some brokers that the sales data was on the weak side.
According to Fairfax Media, Deutsche Bank had a 5.6% increase estimate on the table for Coles, which seems much too high given what happened to retailing generally in the quarter.
With little or no growth in the retail sector in the quarter, the performance of most of Wesfarmers’ chains was solid, with the slide at Target expected because new management is trying to correct problems caused by previous management of the business.
The Coles supermarket chain posted a 4.9% rise in topline sales to $8.9 billion in the three months ended September. Same store sales rose a very solid 3.4%, which was significantly faster than the CPI for the same period of 1.2%.
The performance at Coles was made to look better by a 2.5% fall in food and liquor prices during the quarter due to ‘‘significant produce deflation’’ and discounting, according to yesterday’s statement.
Sales from the Bunnings DIY chain jumped by a very strong 10.4% to $1.99 billion, with comparable store sales up a sharp 7.1% in the quarter and sales at the Officeworks chain were up 3% to $373 million. No comparable sales figures were given for Officeworks
The Kmart department store chain continued its strong performance of the past four years with another solid quarter. Sales rose 4.6% in the quarter to $970 million and 2% on a comparable store basis.
But it was a different story at Target where, in a planned campaign to liquidate overstocks, sales fell 6.1% to $789 million and 5.2% on a comparable store basis.
WES YTD – Coles, Kmart, Bunnings boost sales performance
Wesfarmers said total sales for the quarter in its Coles Express convenience chain including fuel, were $2 billion, up 6.5% on the previous corresponding period.
"Headline fuel volumes declined 1.1 per cent during the quarter and comparable fuel volumes declined by 1.6 per cent as customers responded to higher fuel prices during the period. Within this result, Coles Express continued to drive positive outcomes in its diesel/premium fuel and multiple value offers," the company said.
Convenience store sales, excluding fuel sales, increased by 1.3% for the quarter and comparable store sales increased 1.6%.
Wesfarmers CEO Richard Goyder said he was generally pleased with the sales results, in particular the good performances of Coles, Bunnings, Officeworks and Kmart.
“Our continued focus on improving merchandise offers and value for customers was reflected in strong transaction and volume growth achieved across our retail businesses,” Mr Goyder said in yesterday’s statement from the company.
He said Coles’s quarter saw "volume growth remaining strong, particularly in fresh produce. Coles continued to offer customers better value through ongoing investment in lower prices, while making good progress in both product and store format innovation.
“Bunnings achieved good growth in both consumer and commercial areas as customers continue to respond well to our strategic initiatives which are creating more value and better customer experiences.
“Officeworks saw good transaction growth achieved in both the store network and online, consistent with Officeworks’ ‘every channel’ strategy," he said.
Mr Goyder said that the fall in sales at Target was expected. "Clearance activity of excess winter inventory during the quarter and the non-repeat of promotional activity in the same period last year significantly affected trading. During the quarter Target continued to strengthen its leadership team to oversee its longer term transformation with a number of key appointments made."
And, Kmart’s "transactions and units sold increased for the fifteenth consecutive quarter, with good performances achieved in core apparel and home categories”. Mr Godyer said.
