A second trading update from Wesfarmers in just under three weeks with the company telling the market it has been seeing significant demand growth in its Bunnings and Officeworks businesses as well as online (like so many other retail-based companies).
Wesfarmers said Bunnings has seen continued growth in consumer and commercial markets across all major Australian trading regions and in all product categories, while at Officeworks, there has been strong demand for technology, home office furniture, and learning & education products.
Sales growth at Bunnings is up 19.2% so far in the second half of the financial year, compared to the 5.8% rise in the six months to December.
Officeworks has also seen sales growth jump to 27.8% jump between January and May, compared to 11.5% in the first half.
Sales at online marketplace Catch surged 68.7% in the current half as customers preferred shopping online during COVID-19 lockdowns.
Wesfarmers said that that helped total online sales across the group increase 60% since the start of the year to $1.9 billion including Catch (at around $500 million).
But these gains were not shared at the troubled Target department store or the more fancied Kmart.
Wesfarmers said that while sales momentum in Kmart and Target has improved in recent weeks, both department store chains continue to underperform. Second-half sales were up 4.1% at Kmart and fell again at Target, down 1.8%.
The Kmart performance at least is better than what we have seen at Myer and David Jones.
Wesfarmers also pointed to higher costs with Bunnings paying an extra $20 million in additional cleaning, security and protective equipment to respond to COVID-19 over the last three months.
Bunnings will incur costs of $70 million in the 2020 financial year associated with trading restrictions in New Zealand, the permanent closure of seven small-format stores, and the accelerated rollout of its online offering, including the write-off of old e-commerce platform assets.
Officeworks will see its second-half earnings growth weakened by changes in sales mix and continued investment in price, team, technology, and COVID-19 related operating costs.
Wesfarmers also cautioned that it is uncertain whether the higher levels of sales growth will continue for the remainder of the calendar year, given the significant changes to usual customer shopping patterns and likely changes to government measures.
Anyone thinking these boom-like sales numbers for Bunnings and Officeworks will continue into the December half
of 2020 is nuts.
Wesfarmers shares edged up 0.1% to $41.77 so not too many investors seen the sales surge lasting much longer.
