Bunnings sales up

Bunnings2Bunnings Australia and New Zealand, which could soon comprise more than half of Wesfarmers earnings when Coles is spun off, has seen sales increase by 8.9 per cent to $3.04 billion in the third quarter.

BUKI, which Wesfarmers is reviewing and may sell off in the coming months, has seen store-on-store sales decline by 15.4 per cent in the third quarter, down 13.9 per cent FYTD.

Bunnings Group managing director Michael Schneider said that improved trading in the first quarter was offset by severe weather in March, but that “satisfactory” progress had been made on improving the Homebase network.

“Retail execution standards lifted in Homebase in preparation for spring and stores are well positioned for the arrival of the season,” he said. “Refinement of the Bunnings format is ongoing with recent conversions reflecting updated range plans.”

BANZ has continued its momentum, with a 7.7 per cent increase in store-on-store sales. Year-to-date total sales were up 9.6 per cent to $9.6 billion, up 8.6 per cent FYTD

Five Bunnings’ warehouses were opened in Australia during the quarter, with a further 17 still under construction, including six former Masters’ conversions.

There were eight Bunnings pilots opened in the UK during the third quarter and seven Homebase stores closed, four for conversion and three permanently. There were 227 Homebase stores and 23 Bunnings stores in the UK as at 31 March.

Coles sales up on moderating food deflation

A moderation in food deflation and basket size increases have helped drive sales for Coles in the third quarter, while Target and the Bunnings UK & Ireland venture have seen sales decline.

Coles top line revenue grew by 0.3 per cent to $9.04 billion in the three months to 31 March, constrained by an 8 per cent decline in convenience sales, which offset a 1.9 per cent increase in food and liquor to $7.7 billion.

Food comps were up 0.9 per cent for the quarter, a three-fold increase in Coles’ first quarter performance but weaker than the 1.4 per cent increase booked in the second quarter.

Coles managing director John Durkan told analysts on Thursday that the soon to be spun off supermarket chain had continued to invest in price in the third quarter, with a slight slowdown in transaction growth from the second quarter being offset by an increase in basket size.

Durkan said that both comparable sales and sales per square metre were on an improving trend in line with the improvement trajectory outlined in February.

“We’re in the place we wanted to be, of course we’d like to see more but we’re going in the right direction,” Durkan said.

Coles dropped the price on 500 products in the third quarter, but Durkan said that promotional participation had continued to decline as every day low price sales increased.

Financial year-to-date (FYTD) food comps, which run to 25 March, were 0.9 per cent.

Food and liquor comps adjusted for the timing of New Year’s Day and Easter were up 1.3 per cent, .3 per cent ahead of the second quarter. FYTD food and liquor comps were up 0.9 per cent.

Coles’ food and liquor prices declined by 0.7 per cent during the third quarter, down from 0.9 per cent in the second quarter. This has brought price deflation for the financial year to date to 1.3 per cent.

Tell Coles customer satisfaction metrics were the best they have been in seven consecutive quarters, after the business increased its staffing investment to bolster service.

“[We’ve] added more resource into our stores to grow our sales in the last quarter rather than less, we’ve invested more in customer service,” Durkan explained.

Coles’ recently approved enterprise agreement was signalled as a small headwind for the second-half but Durkan said earnings expectations for the full-year remain unchanged.

“Our sales are slightly ahead of where I said they would be at the half and therefore there’s no change to our earnings outlook that we gave then,” he said.

A 14.6 per cent decline in fuel volumes drove a weaker result in convenience, more than offsetting a 0.9 per cent increase in top line convenience store sales.

Durkan said Coles continues to work with its partner on declining fuel volumes and the direction of Coles’ long-term outlook for that side of its business.

Target struggles

A two per cent decline in Target’s sales to $1.29 billion in the third quarter once again held back Wesfarmers’ department store division as Kmart continued its top line momentum, booking a 10.2 per cent increase in sales to $1.24 billion.

Target’s comparable sales declined by 2.6 per cent for the quarter but were worse when adjusted for the earlier Easter timing, down 3.2 per cent on an adjusted basis.

FYTD to 25 March showing a 5.2 per cent decrease in top line sales and a 5.5 per cent decline in comparable sales.

Wesfarmers’ department stores chief executive Guy Russo said the Target figures reflect ongoing efforts to turnaround the business, including resetting price, range and product.

“During the quarter the business continued to focus on improving fashionability and the quality of sales,” Russo said.

Toys and general merchandise were singled out as declining categories for Target, offsetting online sales and increases in apparel and homewares.

Kmart was much more positive, experiencing comparable store sales by 6.8 per cent for the third quarter.

FYTD sales have increased by 9 per cent, while comparable store sales were up 6 per cent.

Kmart managing director Ian Bailey said Kmart had delivered a solid quarter, supported by home, kids and general merchandise.

“Sales performance throughout the third quarter was driven by an increase in customer transactions with al categories, except family entertainment, achieving double digit unit growth,” he said.

Kmart opened three new stores in the quarter, including one Target rebrand, and completed four store refurbishments.

Officeworks impacted by Easter

Officeworks sales were up 7.2 per cent to $598 million for the quarter, impacted by the earlier timing of Easter. FYTD revenue was up 8.8 per cent to $1.6 billion.

“The ongoing work within Officeworks to strengthen and expand the customer offer continued to produce strong results,” Officeworks managing director Mark Ward. “The critical back-to-school trading period also delivered a strong start to the second half of the financial year.”

Officeworks opened two stores and closed one in the third quarter.

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