Wesfarmers first quarter results show strong growth from Coles

Posted by AFN Staff Writers on 3rd November 2014
Wesfarmers first quarter results show strong growth from Coles
Wesfarmers first quarter results show strong growth from Coles

Wesfarmers Limited has announced its retail sales results for the first quarter of the 2015 financial year, showing strong growth from Coles, Bunnings and Officeworks.

Managing Director, Richard Goyder, said that the sales results were generally pleasing, with Wesfarmers’ retailer portfolio continuing to “invest productivity improvements into lower pricing, enhance merchandise offers and customer service, as well as improve its store networks”.

“Our retail divisions remain focussed on delivering increased value to our customers and preparations for the Christmas trading period are well progressed,” Mr Goyder said.

“Bunnings’ total sales growth of 11.0 per cent built on the strong growth achieved in prior periods, reflecting further value creation and enhanced customer experiences, and the contribution of recent store network expansions,” Mr Goyder said.

“Officeworks’ sales growth of 8.0 per cent reflected the sound execution of its ‘every channel’ strategy with sales growth recorded in stores and online.

“Kmart recorded total sales growth of 2.9 per cent for the quarter, supported by good performances of Kids and Home categories.

“Target’s total sales declined 4.6 per cent during the quarter reflecting the transition to a ‘first price, right price’ strategy.

Coles

Food and Liquor

Coles headline food and liquor sales for the first quarter were $7.3 billion, up 5.8 per cent on the previous corresponding period.

Coles recorded comparable food and liquor store sales growth of 4.3 per cent in the quarter. Excluding liquor, comparable food store sales increased 5 per cent.

Food and liquor price deflation eased to 0.5 per cent for the quarter, supported by ongoing investment in value which was partially offset by tobacco excise increases and fresh produce inflation as a result of cooler weather and tougher growing conditions.

Coles Managing Director, John Durkan, said that the comparable sales growth achieved during the quarter was pleasing, driven by further value investments resulting in continued improvements in sales density, transactions, basket size and fresh participation.

“Coles understands that Australian families are facing higher costs of living and we have continued to invest in better value, including launching ‘Down Down Frozen’ across more than 100 product lines. We have also provided increasingly targeted offers to customers through flybuys,” Mr Durkan said.

“Coles is focused on being ‘a little better every day’ and we believe that Australians deserve world-class quality, service and product choice, with strong supplier relationships a key enabler of this focus,” Mr Durkan said. “During the quarter, both Murray Goulburn and Norco commenced supplying Coles branded milk under long-term arrangements,” he said.

“Our community contributions also increased during the quarter, and we are proud to have raised $2.8 million as part of Daffodil Day and to have reached our Red Kite fundraising target of $10 million,” Mr Durkan said.

Coles continued to grow its store network during the quarter through the opening of new space and the continued renewal of the fleet. Coles opened four larger supermarkets and closed one smaller supermarket during the quarter, taking the total number of supermarkets to 765. A further 22 stores were refurbished during the quarter, taking the total number of supermarkets in the renewal format to 444, which represents 58 per cent of the network.

While Liquor continued to underperform food in the quarter, transformation activities commenced during the quarter. These activities included key leadership changes, a store support centre restructure and the development of detailed plans to accelerate store closures and reset the range.

Coles opened 16 new liquor stores, the majority of which were stores co-located with Coles supermarkets, and closed nine stores during the period, resulting in a total of 838 liquor stores. One hotel was opened during the quarter, taking the total number of hotels to 91.

Convenience

Total Coles Express sales, including fuel, for the quarter were $1.9 billion, a decrease of 2.3 per cent on the previous corresponding period.

Headline fuel volumes declined 3.0 per cent during the quarter and comparable fuel volumes declined 4.6 per cent, with lower fuel prices during the quarter more than offset by reduced fuel discounts following the December 2013 undertaking to the Australian Competition and Consumer Commission.

Convenience store sales, excluding fuel sales, grew by 11.1 per cent for the quarter. Comparable store sales grew 8.3 per cent as a result of improved ranges, more effective promotions and the effect of tobacco excise increases.

Coles Express opened four new sites and closed one during the quarter, bringing the total store network to 645 sites.

Home improvement and office supplies

Home Improvement

Total sales for the quarter4 of $2.2 billion were 11.0 per cent above the previous corresponding period. Total store sales for the quarter grew 10.9 per cent, while store-on-store growth was 8.2 per cent.

Wesfarmers reported sales growth was achieved in all key trading regions, across all product categories and in both consumer and commercial areas.

Home Improvement and Office Supplies Managing Director, John Gillam, said the solid trading momentum stemmed from good contributions from all growth drivers in Bunnings’ strategic agenda.

“In particular, we have focussed on creating more value and investing to further enhance experiences for both consumer and commercial customers,” Mr Gillam said. “Pleasing outcomes are evident and this focus continues,” he said.

During the quarter, four Bunnings Warehouses, one smaller format store and one trade centre were opened. As at the end of the quarter, a further 20 stores were under construction. The timing of new store openings during the financial year is expected to be evenly weighted across the period.

Office Supplies

Total sales for the quarter were $403 million, up 8.0 per cent on the previous corresponding period.

Wesfarmers reported that customers continued to respond favourably to Officeworks’ ‘every channel’ strategy, with strong sales growth achieved in both stores and online.

Mr Gillam said the result was very pleasing and continued to build on the positive results achieved during the past 24 months.

“The business is continuing to drive its ‘every channel’ strategy, providing customers with a unique and brand consistent experience in every channel to market – anywhere, anyhow, anytime,” Mr Gillam said. “Officeworks also continues to expand its presence in the business-to-business market,” he said.

During the first quarter, two Officeworks stores were opened.

Department stores and retailing

Kmart

Total sales of $998 million for the quarter were 2.9 per cent above the previous corresponding period, with comparable7 store sales increasing 0.9 per cent. Growth during the quarter was affected by the continued decline in Entertainment categories, with comparable store sales, excluding Entertainment categories, increasing 1.8 per cent.

Kmart Managing Director, Guy Russo, said the sales performance during the quarter was driven by good growth in core ranges of Kids and Home, together with pleasing results from seasonal and sporting apparel ranges.

“We remain committed to delivering everyday items at the lowest prices and making Kmart irresistible for everyone,” Mr Russo said.

During the quarter, Kmart completed seven store refurbishments and opened four new stores.

Kmart Tyre and Auto opened four stores and closed two stores during the quarter.

Target

Total sales of $753 million for the quarter were 4.6 per cent below the previous corresponding period, with comparable store sales decreasing 2.3 per cent.

Target Managing Director, Stuart Machin, said that the sales performance in the quarter continued to reflect the transformation underway with price deflation outpacing volume growth as the business transitions from high-low pricing to ‘first price, right price’.

“During the quarter, we delivered better value to customers through lower prices across our range. Growth in units sold was, however, offset by price deflation,” Mr Machin said. “We continued to implement the significant changes required to transform the business and, although there remains much to do, better ranges are expected to be delivered for summer through improved fashion, style and quality at lower prices,” he said.

During the quarter, Target opened one new store, one replacement store and closed three stores.