Wesfarmers (WES) has some headaches in its retail portfolio according to its third quarter sales report released on Thursday.
Supermarkets giant, Coles is definitely stalling and going ex-growth. Department store chains, Target continues to wobble, and Kmart saw a slowing in sales growth in the three months to March from last year’s double digit levels.
But Coles’ lack of performance is the biggest problem. It reported its slowest sales growth since the Wesfarmers takeover nine years ago.
Wesfarmers shares eased 1.4% to $43.30.
Wesfarmers said yesterday that the supermarket chain’s same-store food and liquor sales growth slowed to just 0.3% in the March quarter.
Adjusted for the later timing of Easter, Coles’ same-store food and liquor sales rose 0.7%, compared with 0.9% in the December quarter, 1.8% in the September quarter and 4.9% in the March quarter a year ago. Including sales from a net five new supermarkets and seven new liquor stores, Coles’ headline food and liquor sales rose 1.2% in the quarter to $7.6 billion.
The figures were slightly below market forecasts, for Easter-adjusted same-store sales growth of 1% and half a per cent on a top line basis.
They suggest that Coles could have ceded more market share to Woolworths, which analysts expect will report Easter adjusted same-store sale growth of 3.2% in its March quarter sales update out Friday morning.
Coles continued to cut prices during the quarter, moving more products such as mince and private label cheese to every day low value. Prices fell 0.5% on average or down 2.2% excluding tobacco and fresh produce, where supply shortages sent prices to three-year highs.
The Bureau of Statistics said on Wednesday that while vegetable prices rose in the March quarter, fruit prices fell sharply.
Bunnings though remains the star. Sales at Bunnings in Australia and New Zealand, rose 7.7 to $2.8 billion on a topline basis, or a solid 6% on a comparable store basis as the home improvement chain again grew market share after the closure of Woolworths’ Masters.
Though Wesfarmers says it could be on the market Officeworks again enjoyed a solid quarter (with back to school and colleges boosting volumes) Headline sales rose 9% to $558 million.
However, sales were soft in the department store sector as consumers pulled back on discretionary spending over the three months.
Star performer, Kmart’s saw sales adjusted for the later timing of Easter rise 2.5% with comparable store sales increasing 1.6% for the quarter.
But same store or comparable store sales were slightly negative at -0.3% after growing 15.2% in the year-ago period.
Target though remains a basket case and its performance raises further questions about the sustainability of its model.
Topline slumped 18.1% to $555 million and same-store sales, adjusted for Easter, fell 16% as the discount department store reset prices and overhauled its range.
Wesfarmers chief executive Richard Goyder said the sales performance of the group’s retail businesses was generally pleasing given the later timing of Easter in the 2017 financial year.
“Coles’ headline food and liquor sales increased by 1.2 per cent during the quarter, with the business investing more significantly in the customer offer," Mr Goyder said.
“Bunnings Australia and New Zealand achieved total sales growth of 7.7 per cent during the quarter, building on the strong growth achieved in prior periods through the continued solid execution of its strategic agenda.
"In the United Kingdom and Ireland, further progress has been made on transition, separation and integration activities following the Homebase acquisition. Following the successful launch of the first Bunnings pilot store in February 2017, the second pilot store was opened in Hatfield Road, St Albans on 12 April 2017,” Mr Goyder 9who retires at the end of the year) said n yesterday’s statement.
