It is now quite apparent that the stockmarket is treating Wesfarmers as Coles Group, with some bits and pieces added on.
While it had to happen, the reaction to yesterday’s investor update, like previous statements, featured reporting on Coles operations, especially supermarkets, to the exclusion of the coal, insurance, industrial products and energy divisions.
Those are dwarfed by the Coles Group businesses acquired over 18 months ago and the previously strong coal division has accepted the reality of falling exports prices for coking and steaming coal.
Wesfarmers has concluded the majority of its annual coal price negotiations for exports from the Curragh mine in Queensland with the weighted average price falling 59%.
The insurance business is looking at lower returns in 2009.
But Coles is looking up.
CEO Richard Goyder made it clear Wesfarmers was in Coles for the long haul and had designed the company’s strategy accordingly.
He said the company was looking at an uncertain global environment but its businesses were strong; it was based on 5-year forecasting incorporating deep downside scenario planning (just in case) and would continue to focus on running businesses well and look for good return on capital through efficiencies and ongoing capital returns focus.
Wesfarmers would look to effect sustainable turnarounds, engage with staff and had a long term approach, consistent strategies.
Coles was the big interest, seeing it cost the company billions of dollars, just before the crunch erupted.
So far there are signs of an improvement, but investors remember there was also a false dawn in the early days of the last Coles Myer management.
Sales at Coles supermarkets grew 7.6% to $5.3 billion last quarter, and Wesfarmers said the momentum gained in the lead-up to Christmas has been maintained.
Once this year’s late Easter, which fell in the second quarter rather than the first quarter, is taken into account, sales grew 8.3%.
But it is a lot healthier than a year ago and the turnaround being engineered by Ian McLeod, imported from the UK, seems to be taking hold and isn’t a one quarter wonder.
On a comparable stores basis, the sales grew 6%, less than the 7.9% comparable sales growth reported by major rival Woolworths last week.
"We are seeing improvement in many aspects of the business (Coles) but a lot remains to be done,” chief executive Richard Goyder told analysts.
The company said the comparable store sales growth compared to growth of about 4% in the December quarter, and less than 2% a quarter before that.
Wesfarmers said "phase 1” of its turnaround of the grocery retailing giant was "on track”, almost a year after Mr Ian McLeod took on the job.
He told investors the company was expecting the "tough economic conditions continue to adversely affect consumer confidence".
Mr McLeod said "customers (were) looking to save money and eating out less and eating at home more".
That’s how Woolies boss, Michael Luscombe summed up his company’s outlook last Friday and the mood of his customers.
Mr McLeod said Coles’ focus will be on providing customer value with: competitive fresh and house-brand offer; better promotional program i.e. $10 family meal promotion; key strategic programs will continue to be driven at pace; re-investment in the business to continue; supermarket renewal rollout to commence in new financial year and he warned that delivering scale of change: will require time.
In Target stores, sales during the March quarter rose 6.1%, with underlying same-store sales growing 2.9% in the 14 weeks to April 13, which includes Easter trading.
The company said sales in those 283 stores had been "volatile and inconsistent”, but this was partly offset by the government stimulus package in December and January.
At the Kmart chain, sales were described by the company as "poor” in January and February, but picked up in March, which the company linked to government stimulus measures.
Comparable store sales for the quarter grew just 0.1% in the 14 weeks to April 13, and the company expects trading performance at the Kmart stores to "remain soft”.
The star business was the existing Bunnings Hardware chain which posted 11.1% comparable store sales growth, up from 9.9% a quarter earlier and 4.9% a quarter before that.
Mr Goyder said it was a "really outstanding performance from Bunnings”.
But the trade side of the business was doing it tough ("challenging" was the word used) and there had been a minimal impact so far from the first home buyers grants scheme that has boosted new home lending.
At Officeworks sales growth was the best it had been since being acquired. Sales rose 5.7%.
Mr Goyder said there was "a lot of work to do, but we’re reasonably pleased with the progress”.
WES shares rose 2% or 46 cents to $20.86 on a day when the market was down 2.4%, so the presentation gained an early tick.
