of productivity initiatives, which supported investment in customer value propositions and helped mitigate higher costs,” he added. Kmart Group, which includes the discount department store chains Kmart and Target, with 447 combined locations, delivered a 9.2 per cent increase in earnings before tax to A$1.046 billion in FY25. The parent company, Wesfarmers, which also owns the hardware giant Bunnings, office supplies business Officeworks and pharmacy retailer Priceline, reported a net profit after tax of A$2.9 billion, up from A$2.5 billion in FY24.  “Kmart Group’s higher earnings were supported by its strong value credentials and focus on productivity and cost control,” Scott reiterated. The group’s productivity gains are evident in its results, with earnings growth outpacing revenue growth of 2.9 per cent and comparable sales growth of 3 per cent year-on-year. This was in a year when many retailers relied on discounts to drive sales. But these results don’t surprise Brian Walker, founder and director of the Retail Doctor Group, who believes Kmart Group has always excelled at operational discipline.  “Their lean supply chain, volume-driven buying power, and sophisticated inventory management mean they can flex prices without collapsing margin,” Walker told Inside Retail.  “They’ve also trained customers to expect everyday value rather than just chasing promotions,” he continued. “In a high-cost, low-confidence environment, this ‘trust in value’ positioning has been a moat.” Weather proofing  Kmart Group’s everyday low prices and market-leading offers undeniably drove sales and earnings growth, but it was its productivity initiatives that ensured it could navigate the last twelve months’ challenging retail conditions. Productivity gains were delivered through the integration of Kmart and Target’s backend systems and processes, as well as the ongoing digitisation of operations across stores, sourcing and supply chain.  According to Kmart Group, these productivity gains mitigated the impact of the rising cost of doing business. The group also transitioned two customer fulfilment centres from Catch to Kmart Group during the period, and it has commenced the planning phase for its ‘Next Gen’ omnichannel facility in New South Wales. Other digital initiatives aimed at increasing productivity include the expansion of radio frequency identification (RFID) capabilities to improve incremental sales and customer engagement and drive adoption of its mobile app. Since last year, Kmart’s app users have doubled to 1.3 million. “We’re seeing greater levels of digital engagement. So more of our customers are shopping across all of our channels,” said Kmart Group’s MD, Aleksandra Spaseska, on the call with investors and media. “We’ve also seen really strong engagement driven by the app – and our app users in particular – we’re really pleased to see them shopping three times the average customer in store, in addition to online as well,” she continued. From Walker’s perspective, Kmart’s advantage lies in its private-label penetration, high-volume simplicity, global sourcing scale and cost culture. “That combination lets them deliver consistently low prices without relying on short-term discounting, while still protecting EBIT,” Walker stated. Looking ahead, the group plans to continue digitising its sourcing, supply chain and store operations to drive greater efficiencies and offset cost pressures.  “We do have persistent costs of doing business, inflation, and we have continued investment in our strategic programs, but I feel that we also have really good productivity plans in place to mitigate those impacts as we move forward,” Spaseska shared. According to the group, productivity and cost control remain critical to mitigate inflationary pressures and ongoing volatility in the Australian dollar against the US currency. Walker encouraged other retailers to look beyond just pricing and follow in Kmart Group’s footsteps and focus on productivity. He said Australian retailers should ask how technology can lower their cost-to-serve, where they can simplify their range without losing relevance, whether their supply chains are lean enough to handle tariff volatility and if they need to redesign their labour models for efficiency. “Those who view productivity not as cost-cutting but as a path to sustainable margin protection will be best placed,” Walker concluded. “Retailers that don’t will be trapped in the discount cycle, bleeding profit while the likes of Kmart quietly keep winning.” Further reading: “We’re on step one out of 10”: Kmart Group MD Ian Bailey on taking Anko global.