Target A Basket Case As Officeworks, KMart & Bunnings Deliver Growth
Target is still struggling while Bunnings, Officeworks and Kmart delivering growth for Wesfarmers.
Earlier today the big retail group who sold out of Coles for $1.01 Billion reported that revenue at Bunnings increased 5.3% Kmart grew by 7.6% while Officeworks revenues grew by 11%, revenues at Target who have also been hit by staff underpayment claims slumped 7.6%.
Managing Director Rob Scott said the result was underpinned by the strong performance of the Group’s largest businesses in Bunnings and Kmart and Officeworks.
Revenue for Bunnings increased 5.3 per cent to $7,276 million for the half, with earnings increasing 3.1 per cent to $961 million. Excluding the net contribution from property, earnings increased 4.3 per cent on the previous corresponding period.
“Solid earnings growth was achieved despite a lower net property contribution due to fewer property sales, underpinned by an ongoing focus on store cost control and continued growth in consumer and commercial markets across all major trading regions and in all product categories,” Mr Scott said.
“Bunnings continued to execute its strategic agenda and made significant improvements to the in-store and online customer experience during the period, including range expansion, the rollout of click and collect in Australia and the launch of Bunnings’ online marketplace in November 2019, Bunnings MarketLink.”
Kmart Group revenue increased 7.6 per cent to $4,990 million for the half. Kmart sales increased $241 million, more than offsetting a sales decline of $67 million in Target.
Earnings for the division of $345 million were 9.9 per cent lower than the prior corresponding period. Excluding a provision for one-off payroll remediation costs recognised in Target during the half, earnings of $354 million were 7.6 per cent lower than the prior corresponding period. The results for the half include Catch from 12 August 2019.
“Following strong sales growth, Kmart’s earnings increased compared to the prior corresponding period despite unfavourable foreign exchange rate impacts and higher team member wages,” Mr Scott said. “Earnings growth was underpinned by a continued focus on lowest price positioning, strong operational execution and an enhanced product range delivering growth across all categories.
“While Target remained profitable, earnings were below expectations and decreased significantly ($67M) compared to the prior corresponding period due to a reduction in customer transactions and poor performance in key apparel categories.
“While Target remained profitable, earnings were below expectations and decreased significantly compared to the prior corresponding period due to a reduction in customer transactions and poor performance in key apparel categories” Scott said.
“Kmart Group continued to invest in technology and digital capabilities throughout the half. The acquisition of Catch has strengthened the digital expertise in the Kmart Group and will help drive improvements in online execution and innovation.” he added.
Officeworks’ revenue increased 11.9 per cent to $1,231 million, with earnings of $79 million up 3.9 per cent on the prior corresponding period. “Strong revenue growth was delivered in both stores and online as a result of continued investment in the customer experience, with pleasing momentum maintained in the business-to-business segment,” Mr Scott said. “Earnings growth was impacted by continued price investment and higher sales of lower-margin products.”