Wesfarmers has reported solid half year results for its retail businesses for the six months to December 31, 2010, with earnings up 5.6 per cent overall to $1,445 million.
Kmart in particular recorded strong growth during the period, on the back of its “low prices everyday” scheme which has been a hit with consumers. The retailer recently ditched its deep discounting model to switch to the low prices everyday strategy and has seen an additional seven million transactions completed during the half as a result.
Overall earnings were up 13.6 per cent with operating revenue at $2.3 billion. Comparable store sales growth also increased for the retailer, up 1.7 per cent.
However, its sister business, Target, did not perform as well. The retailer experienced a 2.8 per cent decline in operating revenue to $2.1 billion, as price deflation and measures taken to clear seasonal stock took their toll.
In an effort to battle unseasonal weather across Australian, Target recently reduced over 50 per cent of customer price points on like product from the previous year. Core categories for reduction included clothing, footwear and homewares, with no change in product quality.
Comparable store sales for the half year also declined 3.3 per cent. Target's fashion sectors in particular, such as ladies and men's outerwear, suffered sale drops where unit growth was not sufficient to offset the significant price deflation experienced. However, non-seasonal areas, such as underwear, socks and hosiery continued to achieve solid growth, in particular in the ladies categories.
Managing director Richard Goyder said that, despite Target's lacklustre results, it was pleasing to report strong earnings growth and improvements in profitability in most divisions. He also said the latest results bode well for the future.
“Despite an expectation of continuing consumer caution and competitive market conditions in retail, the overall group outlook for the remainder of the 2011 financial year remains encouraging,” he said.
“The performance of our turnaround retail businesses continues to show encouraging results in line with initial acquisition expectations. The strong growth in customer numbers in these businesses is validation that our improvements in product quality, value and in-store experience are resonating well with customers."
Wesfarmers currently has 290 Target stores operating across Australia and 186 Kmart stores in the country.