Wesfarmers shares yesterday edged up after the company delivered a mixed third quarter sales report that confirmed once and for all the adventure in the UK home handyman market through the billion dollar plus purchase of Homebase has been an absolute disaster.
The shares ended up 0.6% at $43.16.
News of another slide in sales at Homebase (blamed on very cold weather in the quarter) obscured another strong report from Bunnings and Kmart, and signs of a small improvement at Coles supermarkets, which will be spun out of Wesfarmers later in the year.
Wesfarmers told the ASX in its third quarter sales report (http://www.wesfarmers.com.au/util/news-media/article/2018/04/25/2018-third-quarter-retail-sales-results) on Thursday that same store sales (the key retail sales measure) at Bunnings UK and Ireland’s fell 15.4% in the third quarter – an acceleration from declines in previous quarters of 15.1%cent, 11.9%, and 4.3%, Total sales – which includes the impact of opening or closing stores – fell 13.5%.
The company said sales were cut by storms in the UK in the quarter which cut foot traffics at Homebase stores. The group is reviewing the future of BUKI (Bunnings UK and Ireland), and is expected to announce in June whether it will exit the business through a sale, shutter it, or if it will try to turn the venture around.
Wesfarmers paid $705 million for the UK chain Homebase in 2016, and has 227 Homebase stores and 23 Bunnings branded outlets. The company wrote down the value of the business by $1 billion in February in what chief executive Rob Scott called “terrible news” for shareholders.
At Coles, comparable food sales grew at 0.9% – the strongest in 12 months – and rose 1.3% when adjusting for the timing of New Years Eve and Easter in the quarter.
Prices across food and liquor fell 0.7% in the quarter – slowing from 1.6% for the December half year as deflationary pressures eased in fresh produce and meat, and dairy prices rose.
“During the quarter we launched our new brand positioning ‘Good things are happening at Coles’ and our exciting new Sports for Schools program, initiatives which will continue to build trust with our customers", said Coles chief John Durkan.
Sales grew strongly at its Bunnings Australia and New Zealand chain with comparable sales up 7.7% in the quarter, compared to 6% in the same quarter last year, while total sales rose 9.1% compared to 7.4% a year ago.
Kmart, regarded as Wesfarmers’ second-best business, grew comparable sales by 7.7% and total sales by 10.2% and remains the best performed retailer in the country.
In a statement, CEO Rob Scott was upbeat, even about the Homebase disaster.
He said the sales performance of the Group’s retail divisions was pleasing, with most businesses demonstrating improved sales momentum in the quarter.
“Bunnings Australia and New Zealand (BANZ) delivered another strong quarter, with total sales growth of 8.9 per cent, through continued focus on delivering increased value and better experiences to customers.
“For Bunnings United Kingdom and Ireland (BUKI), better execution and improved trading results in the early part of the quarter were offset by unusually poor weather in March 2018, resulting in a decline in total sales of 6.5 per cent (13.5 per cent in local currency terms) for the quarter.
“Sales momentum in Coles continued to improve during the quarter, with headline food and liquor sales growth of 1.9 per cent, as the business remained focused on providing customers with the best possible value, service and quality.
“Kmart’s total sales growth accelerated to 10.2 per cent reflecting strong growth in customer transactions and units sold as a result of continued focus on price leadership. Target continued its reset of product, price and range, resulting in a decline in total sales of 2.0 per cent during the quarter.
“Officeworks delivered total sales growth of 7.2 per cent as its ‘every channel’ strategy continued to deliver strong sales growth across stores and online.”
No mention of Target which remains the worst performed of the domestic chains with another 2.6% slide in comparable store sales in the quarter and a 2% slide in total sales.
