Inflation and interest rate rises are leading Australian consumers into a tough period where value for money will again trump convenience.
This is according to Wesfarmers CFO Anthony Gianotti, who spoke at the Australian Financial Review CFO Live Summit in Sydney yesterday.
Gianotti believes the days of pandemic-induced speeding sprees are over and Australian shoppers are again bargain hunting. He believes Wesfarmers’ retail businesses are well set up to accomodate this shift.
“There’s no doubt there’s a new skill set to how you deal with real inflation, and how do you pass that through to pricing in a way that you remain competitive in the market.
“Where we are getting cost price pressures, we’ve obviously needed to pass that through into pricing. But hopefully, we’re mitigating and driving efficiencies and mitigating costs such that the price increases we put through a less than our competitors”.
Gianotti revealed that the average price of an item at Kmart was $7, while Bunnings and Target were also built around a low-price model.
Wesfarmers is “starting to see some input prices come back to pre-COVID levels”, according to Gianotti.
“I think what we’re starting to see now with the cost pressures that are coming through on consumers is that value is becoming increasingly important as it was pre-COVID.
“In terms of inflation and interest rates, I think we’re probably in for a slightly tougher time heading into next calendar year,” the CFO said, predicting there would “likely be further rate increases” from the RBA.
“Looking from the outside in and reading their statements, clearly with inflation at 7.3 per cent that’s too high, it’s not within the 2-3 per cent that the RBA targets”.
