WESFARMERS has trounced rival Woolworths in the supermarket wars for the ninth consecutive quarter, but the owner of Coles didn't have it all its own way.
Liquor sales were lost to the Woolworths-owned Dan Murphy's, while the Target and Kmart merchandise and apparel stores reported flat to negative sales growth.
The Perth-based conglomerate proved it too was vulnerable to the malaise washing through the Australian retail sector, with its fourth quarter sales showing growth at its star performer Bunnings hardware chain impacted by the consumer downturn.
Described as a "solid" result given the backdrop of declining consumer confidence, price deflation and poor weather conditions, Wesfarmers chief executive Richard Goyder keeps bragging rights over Woolworths in the battle for shoppers.
But while Mr Goyder stopped short of openly declaring victory he did claim to offer the best prices on supermarket shelves.
"We have had a really strong focus on strategy in trying to get 'price trust' from our customers through delivering much better value," Mr Goyder said.
"And we are doing that through the 'Down Down' program, we are doing that through weekly price promotions and we now know we are in a much stronger position on price with our customers."
While Woolworths disputes which supermarket has price leadership, the latest figures shows Coles's sales have been growing at a faster rate for nearly two years. Wesfarmers yesterday reported 5.3per cent growth in food and liquor sales to $6.18 billion for the final quarter of 2010-11, taking full-year sales for the Coles business to $25.02 billion or a gain of 6.3per cent.
Woolworths last week reported comparable sales growth of 4per cent for the fourth quarter and only 3per cent for the 2010-11 financial year.
Coles more than doubled the sales growth over its rival, but Woolworths remains the leading supermarket chain with total annual sales of $36.2 billion. But it wasn't a spotless performance by Wesfarmers. Its food and liquor sales result was still below expectations and Bunnings showed signs of stress from the poor trading conditions, leading the market to whack Wesfarmers stock.
Shares in Wesfarmers fell 72?, or 2.4per cent, to $29.37 as investors looked beyond the tit-for-tat supermarket battle to concerns of weakness at Wesfarmers' biggest retail-exposed businesses. Bunnings had fourth quarter sales of $1.55 billion, up 6.1per cent, while full-year sales at the hardware group were $6.77 billion, up 5.7per cent for the year. The result was below expectations.
Wesfarmers' discretionary businesses, Target and Kmart, were hurt by the gloomy consumer outlook and deflation. Target's fourth quarter sales rose 2.9per cent to $897 million but were down 1.2per cent for the year. Kmart recorded quarterly sales of $907 million, down 0.8per cent. For the 2010-11 year, sales were 0.4per cent up at $4.02 billion.
"With the backdrop of a very difficult retailing environment, I think Wesfarmers delivered a very very credible result, right across the board," said Ausbil Dexia chief executive Paul Xiradis.
"The results were marginally below forecast," said Credit Suisse analyst Grant Saligari. "But generally it was still a solid result."
Frequently Asked Questions about this Article…
How did Wesfarmers perform this quarter and how does that compare to Woolworths?
Wesfarmers delivered a solid result despite weak consumer conditions, with its Coles supermarket chain growing faster than Woolworths for nearly two years. Coles’ food and liquor sales grew 5.3% to $6.18 billion in the final quarter and $25.02 billion for the full year (up 6.3%). Woolworths reported comparable sales growth of 4% for the fourth quarter and 3% for the 2010–11 year, and remains the larger chain with total annual sales of $36.2 billion.
Why did Wesfarmers’ share price fall after the results?
Investors focused beyond the supermarket battle to signs of weakness in Wesfarmers’ big retail-exposed businesses. Bunnings and the discretionary chains (Target and Kmart) showed stress from the consumer downturn, which led the market to push Wesfarmers’ shares down to $29.37 (about a 2.4% fall).
What were Coles’ latest sales numbers and what do they mean for investors?
Coles’ food and liquor sales rose 5.3% to $6.18 billion in the fourth quarter and reached $25.02 billion for the full year, up 6.3%. For everyday investors, that signals continued top-line momentum at Coles and a meaningful contribution to Wesfarmers’ retail performance amid tough consumer conditions.
How did Bunnings perform and did it meet market expectations?
Bunnings reported fourth-quarter sales of $1.55 billion (up 6.1%) and full-year sales of $6.77 billion (up 5.7%). Although sales were higher, the result was below market expectations and showed the hardware chain was impacted by the wider consumer downturn and poor trading conditions.
What happened to Wesfarmers’ Target and Kmart sales during the slowdown?
Wesfarmers’ discretionary chains were hit by a gloomy consumer outlook and price deflation. Target’s fourth-quarter sales rose 2.9% to $897 million but were down 1.2% for the year. Kmart recorded $907 million for the quarter (down 0.8%) and ended the year slightly up 0.4% at $4.02 billion.
Did Wesfarmers claim to have supermarket price leadership?
Wesfarmers’ CEO Richard Goyder stopped short of an outright declaration but said the company has focused on building ‘price trust’ with customers. He pointed to the ‘Down Down’ program and weekly price promotions as evidence they are in a much stronger position on price.
How did liquor sales trend and did any rival benefit?
Wesfarmers (Coles) lost some liquor sales to Dan Murphy’s, which is owned by Woolworths. The article notes liquor was one area where Woolworths’ Dan Murphy’s took share from Coles’ liquor business.
What did analysts say about Wesfarmers’ results and what should investors take away?
Analysts called the result generally credible. Ausbil Dexia CEO Paul Xiradis said Wesfarmers delivered a very credible result across the board given difficult retailing conditions, while Credit Suisse analyst Grant Saligari described it as marginally below forecast but still a solid result. For investors, that suggests the business is resilient but faces near-term pressures in discretionary retail and hardware.
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