Wesfarmers (WES) three major retail chains – Coles, Kmart and Bunnings – have made a very strong start to the new financial year, reporting solid sales gains for the September quarter.
Coles grew same store food and liquor sales by 3.6% in the September quarter despite Woolworths’ (WOW) attempt to “neutralise” its rival by cutting grocery prices.
Total sales rose 4.7% (much faster than the rate of inflation) to $7.6 billion in the three months ended September 30, exceeding market growth around 2.8%.
The performance was much better than it seems on paper as food and liquor price deflation hit an annual rate of 1.3% in the quarter. Coles said that was the strongest level of deflation in two years.
Woolworths releases its first quarter sales figures next week and analysts say Coles’ clear lead will be emphasised by another weak performance from Woolies.
WOW vs WES 1Y – Wesfarmers continues to outdo Woolies
Bunnings lifted total sales in the quarter by 11.8% to $2.5 billion, with same-store sales rising 8.2%, faster than the 7.7% growth rate seen in the June quarter.
Mid level department store group Kmart again did well, continuing the sharp improvement in sales seen in 2014-15.
Same-store sales jumped 8.6% in the quarter and total sales by a huge 12.5% to $1.1 billion.
Total sales at the second department store chain Target rose 3.1% to $776 million. Target’s comparable store sales were up 3.2%, which is an improvement.
But Target in fact fell further behind Kmart in the quarter, despite the better trading after a miserable 18 months of weak growth and overstocked store shelves.
Officeworks had another solid quarter with a 6.5% rise in total sales to $429 million, with sales growth recorded both in stores and online.
Wesfarmers’ total retail sales rose 4.6% to $14.23 billion in the quarter and would have been higher if not for falling petrol prices which crimped growth at its Coles Express operation.
Petrol and convenience store sales at Coles Express fell 7.8% to $1.8 billion.
Comparable fuel volumes also fell despite increased investment in fuel discount offers.
The solid sales performance for Wesfarmers left the market unmoved and the shares could only manage an 0.5% rise to $40.92.
