Wesfarmers-owned Kmart Group has revealed the impact mandated store closures, supply chain disruptions and elevated absenteeism had on its operations throughout the first half of FY22.
The Group, which comprises businesses Kmart, Target and Catch, stated that it lost approximately 25% of store trading days during the period.
As such, Kmart Group's revenue declined 9.6% to $4,917 million for the half, while earnings before significant items dropped 63.4% to $178 million.
Meanwhile, combined Kmart and Target earnings declined 55.8% to $222 million for the half.
Speaking on the result, Wesfarmers MD Rob Scott said
"[These results reflect] the significant impact of government-mandated store closures...as well as higher costs and lower stock availability as a result of domestic supply chain disruptions.
"Relative to the Group’s other divisions, Kmart Group and Officeworks results were more significantly impacted by COVID-related disruptions during the half.
"Kmart Group in particular was affected by temporary store closures between July and October 2021.
"Across the Group’s retail businesses there were around 34,000 store trading days impacted by trading restrictions, representing almost 20% of total store trading days for the half.
"This included more than 20,000 store days for which stores were completely closed to customers.
"In addition, operating costs and stock availability were impacted by ongoing supply chain disruptions and elevated team member absenteeism
"The Group’s commitment to pay team members where there was no meaningful work during lockdowns and when they were required to isolate also led to additional costs during the half," he said.
With stores closed, Kmart and Target's online sales lifted, with Wesfarmers reporting a 44% increase in digital sales for the retailers in the half.
"Kmart and Target continued to invest in data and digital capabilities, and strong growth in online sales for the half reflected ongoing improvements to the digital experience for customers, as well as elevated online demand during lockdowns," Scott added.
Image from Target's recent Life Tested campaign.
Wesfarmers also completed the restructure and closing of select Target stores during the half, with the business reporting that converted stores are performing at expected levels, adjusted for COVID lockdowns.
Meanwhile, the Group's pureplay business Catch also reported lower earnings due to the investments in the team, technology, marketing and capabilities, as well as higher levels of inventory clearance compared to the year prior.
During the period, Catch's gross transaction value increased 1.0% in H1 FY22, and 97.5% on a two-year basis.
Scott added that the business has also made changes to Catch's subscription/loyalty service Club Catch.
"Earlier this month, the Club Catch subscription program was rebranded and repositioned as a new program named OnePass, at a reduced monthly fee of $4 or annual price of $40," he said.
"Subscribers will continue to enjoy free delivery on eligible items purchased from Catch, exclusive deals and OnePass-only pricing.
"This program will form the basis of a broader subscription program with opportunities to provide even greater value and convenience to customers across the Group.
"Work is underway on a broader set of benefits that will be available to OnePass subscribers when shopping across Wesfarmers’ retail businesses," Scott said.
Going forward, Wesfarmers said its retail businesses will, "maintain their focus on meeting changing customer needs and delivering even greater value, quality and convenience for customers."
The business will continue its investment into digital capabilities to enhance the retail brands' online offering, expand the addressable markets and improve operating efficiencies.