Australian low-price retailers Kmart and Target, under Kmart Group, have recorded a combined revenue increase of 16.5% on the prior year, hitting $10.6 billion for FY23.
Earnings of $769 million were 52.3% above the prior year and a record for the business.
Kmart accounted for 79% of total Kmart Group sales in the year as total sales increased by 22%. Target lifted by 1.1%.
Parent company Wesfarmers cited Kmart’s low-price positioning for the 12% growth in comparable sales, as consumers responded to cost of living pressures.
Sales increased across all of Kmart’s categories for the year, with units sold and transaction volumes also above the prior year according to Wesfarmers.
Target’s comparable sales decreased by 0.5% for FY23. In the second half, the department store’s total sales decreased by 7.2%, and comparable sales decreasing 4.0 per cent.
Wesfarmers confirmed Target’s second half trading performance was variable across categories, with relatively stronger performance in apparel compared with challenging trading conditions in home and toys.
Wesfarmers attributed earnings growth for the year to strong sales growth and strong execution of pricing strategies and operational plans, as well as the continued realisation of benefits from the significant network change program undertaken across Kmart and Target.
Kmart opened four new stores and closed three stores during the year, and Target closed four stores. Total stores for both are 325 and 124 respectively.
“Kmart Group’s focus on productivity and cost control helped mitigate cost of doing business pressures from inflation, increased shrinkage and ongoing volatility in exchange rates,” Wesfarmers reported in a trading update. “Target maintained a low cost base during the year, and the business remains profitable.”
During the financial year, Kmart rolled out RFID technology across all stores.
Wesfarmers noted that Kmart remains uniquely positioned to extend its low-price leadership and profitability and grow its share of wallet as customers continue to increase their focus on value in an inflationary environment. The retailer’s private label brand Anko is currently expanding across key international markets.
“Building on investments over recent years, Kmart will also pursue opportunities to drive further efficiencies in its business through continued digitisation of sourcing and supply chain operations and digitisation of the store operating model,” Wesfarmers noted.
“General inflation remains elevated, and cost pressures are expected to persist across operating expenses, despite moderation in raw material and international freight costs.
“Kmart will leverage the strength of its business model to focus on productivity and cost control to mitigate these impacts while continuing to lead on lowest price.”
Meanwhile, Target’s trading performance in the first half of the 2024 financial year is expected to remain consistent with the trends observed in the second half of the 2023 financial year.
For FY24, Wesfarmers noted Target will enhance its product offering, particularly in apparel and soft home, with further integrating of both Kmart and Target processes, systems and organisational structures to achieve one operating model across two brands.
“The proactive changes will drive greater operating efficiencies and better leverage the relative strengths of the Kmart and Target propositions.
“The introduction of select Anko ranges across hard home and general merchandise into Target stores is planned to occur early in the second half of the 2024 financial year, and most operating model changes will occur in the second half of the 2024 financial year.”