Wesfarmers Limited has released its second quarter retail sales results for the period ending 31 December 2011. While Coles has continued strong year-on-year sales growth of 6.7% and Bunnings/Officeworks 4.8%, Kmart fell by 2.2% and Target by a disappointing 3.1%.
Wesfarmers managing director Richard Goyder said that given a relatively tough retail environment and widespread deflation he was pleased with the group’s sales result, particularly the momentum in Coles and Bunnings, where both businesses recorded good sales growth in the second quarter.
“Our retail businesses continue to work hard to execute strategies that are improving the value and shopping experience of their customers,” Mr Goyder said.
“Coles reported its fourteenth straight quarter of comparable store sales growth with customer numbers and sales units continuing to grow faster than sales. This period delivered a record-breaking Christmas, with Coles achieving its biggest-ever sales week as more customers responded to the greater value offered as well as improvements in product quality and in-store service.
“Bunnings’ sales increased 5.5 per cent in the quarter, despite ongoing deflationary impacts, reflecting a solid contribution from new store openings and growth in both consumer and commercial areas.
“Kmart and Officeworks continue to benefit from initiatives put in place to reposition these businesses. It was encouraging to see that both divisions reported another quarter of strong growth in both units sold and customer transactions, although sales were affected by the deflationary pricing environment.
“Target experienced difficult trading conditions in the quarter, with total sales declining 3.1 per cent. December sales were more encouraging as the business took steps to improve promotional effectiveness and stock management.”
Mr Goyder said in a retail environment where consumer sentiment remained subdued, each of the retail businesses had managed their seasonal inventory positions well with appropriate levels of good quality inventory on hand, which would be of benefit going into the second half.
COLES
Coles’ total food and liquor sales for the second quarter of the 2012 financial year grew by 4.3 per cent to $7.3 billion. Total sales in the first half of the 2012 financial year increased by 4.9 per cent to $13.6 billion.
In the fourth year of the turnaround, Coles delivered comparable food and liquor store sales growth of 3.7 per cent in the second quarter1 and 4.4 per cent in the first half, with underlying volume growth continuing strongly.
Volume growth exceeded sales growth as deflation in fresh produce and continued investment in value led to food and liquor deflation increasing to 2.4 per cent in the second quarter. Deflation for the quarter reflected an increase from deflation of 1.8 per cent in the first quarter, resulting in deflation of 2.1 per cent in the first half.
Coles managing director Ian McLeod said all of Coles’ businesses had made good progress in the second quarter and customers rewarded the supermarket for its continued investment in lower prices as part of its ‘Down Down’ campaign.
“We have delivered share growth across all of Coles‟ businesses,” Mr McLeod said. “We were particularly pleased with the strong volume growth which has been driven by investment in value, quality, and service at a time when Australian families are looking to manage tight household budgets.
“As we continue the transformation program, we are encouraged that our drive to change the business has resonated well with customers and is reflected in improvements in perception and increasing customer numbers.”
Home improvement and office supplies: Bunnings and Officeworks
Bunnings
Total sales for the quarter of $2.1 billion were up 5.5 per cent on the previous corresponding period. Total store sales for the quarter4 grew 5.5 per cent, while store-on-store growth was 3.2 per cent.
For the first half of the 2012 financial year, total sales were up 6.8 per cent to $3.8 billion. Total store sales grew 7.0 per cent in the first half, while store-on-store growth was 4.6 per cent.
Sales growth for the quarter was achieved in both consumer and commercial areas across most key trading regions.
Managing director of home improvement and office supplies John Gillam said the $243 million growth in sales in the first half was pleasing given ongoing deflationary impacts and challenging trading conditions, and reflected the strong focus in the business on generating more value for customers and category expansion, particularly paint and storage.
“Good progress in all aspects of Bunnings’ strategic agenda, in particular, network expansion and reinvestment, service improvements for consumer and commercial customers, and offer improvements, has the business well positioned to achieve further sales growth,” Mr Gillam said.
Two Bunnings Warehouses were opened during the second quarter, taking the total trading location openings for the first half to seven. There are currently 16 stores under construction, ten of which are expected to open before the end of this financial year.
Office supplies
Total sales for the quarter were $349 million, up 0.9 per cent on the previous corresponding period. Retail sales across the Officeworks store network grew by 0.2 per cent which was underpinned by continued strong transaction growth.
During the first half of the 2012 financial year, total sales were up 0.6 per cent to $710 million, with retail sales increasing by 0.2 per cent as the business built on the solid sales growth achieved during the first half last year.
Price deflation continued to present challenges in a number of categories, particularly technology and furniture. The business focus on improving the offer through execution of the strategic agenda continues to be received favourably by an increasing number of customers.
One new Officeworks store was opened during the second quarter.
Target
Total sales of $1.3 billion for the quarter were 3.1 per cent below the previous corresponding period, with comparable store sales declining 3.1 per cent.
For the first half of the 2012 financial year, total sales declined 2.5 per cent to $2.1 billion, with comparable7 store sales declining 3.5 per cent.
Target managing director Dene Rogers said total sales for the quarter had been negatively affected by tough trading conditions across the market.
“Having joined Target just prior to the important Christmas trading period, I am pleased with the initial customer response to the changes made to our marketing program.
“While customer numbers were down across the quarter, there was a noticeable improvement in December as the business took steps to improve its promotional effectiveness.
“We also increased our focus on inventory management to ensure that stock on hand is appropriate as we approach the change in season,” Mr Rogers said.
Target opened six new stores and refurbished 13 stores during the quarter.
Kmart
Total sales of $1.4 billion for the quarter1 were 2.2 per cent below the previous corresponding period, with comparable7 store sales declining 2.7 per cent. The quarter represented the eighth consecutive quarter of growth in transactions and units sold.
For the first half of the 2012 financial year, deflation resulted in a total sales decline of 1.3 per cent to $2.3 billion, with comparable7 store sales declining 1.4 per cent.
Kmart managing director Guy Russo said it was pleasing to record another quarter of growth in unit sales and customer numbers.
“During the period the business continued to improve its in-store offer and provided customers with even greater every day value, while better product sourcing, pricing disciplines and stock management continued to benefit the business,” Mr Russo said.
During the quarter, Kmart continued to focus on refreshing its stores with the completion of three store refurbishments, including the re-opening of a store in New Zealand following earthquake damage in February 2011. Kmart Tyre and Auto opened five new stores during the quarter.