Wesfarmers’ mixed results

Kmart front of store-X2Coles’ food and liquor sales growth has slowed in the first quarter, rising 2.9 per cent to $7.85 billion compared to 3.5 per cent growth in the preceding quarter.

Wesfarmers’ hardware business Bunnings lifted quarterly sales 7.4 per cent to $2.7 billion.

Kmart’s sales jumped 11.2 per cent to $1.2 billion, while Officeworks’ sales rose 7.5 per cent to $461 million.

But Target continued its disappointing performance with its sales falling 17.1 per cent to $643 million.

Wesfarmers said a pre-tax, noncash impairment of $1266 million was recorded in the carrying value of Target, with $1208 million recorded as a writedown of Target’s share of goodwill arising on the acquisition of the Coles Group.

Guy Russo, CEO department stores at Wesfarmers said two Target stores will be rebadged to Kmart during the first half of the 2017 financial year.

Coles’ comparable food and liquor sales, a key measure of revenue growth which removes one-off events, increased 1.8 per cent on the prior corresponding period.

Comparable food sales increased 1.7 per cent for the quarter, while the rise in food and liquor prices reduced to one per cent on average, Coles says.

The comparable sales were weaker than the 2.8 per cent (food and liquor) and 2.9 per cent (food) comparable growth recorded in the fourth quarter of 2015/16 where price deflation was at 2.4 per cent.

Coles managing director John Durkan described the latest growth figures as satisfactory as the supermarket’s owner Wesfarmers released the trading update on Wednesday.

“In our food business, we have seen a change in market conditions over the past year,” Durkan said.

“Market growth has slowed, while at the same time there has been an increase in competitive intensity.”

He said Coles had about 4,000 items on lower “every day” prices and fresh produce was a key sales driver.

“The liquor business achieved its fourth consecutive quarter of growth in comparable store sales, led by the continued improvement in Liquorland’s performance,” Durkan said.

At 1010 AEDT, Wesfarmers’ share price was $1.56, or 3.55 per cent, lower at $42.40.

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