Customers vote with wallets: Wesfarmers enjoys sales bounce
Chief executive Richard Goyder said on Thursday he thought there had been an "election campaign effect" - weaker sales late in the campaign followed by a recovery after the poll.
"People like certainty, so I would say the last couple of weeks of the election campaign were softer. Since then, things have been much better," said Mr Goyder, who runs the company that owns Coles, Bunnings, Kmart and Target. "Whether that's just a couple of soft weeks and a couple of strong weeks, time will tell."
Mr Goyder revealed the post-election lift as he said local business leaders would push for global trade liberalisation to be a priority when Australia hosted the G20 summit next year.
With authorities pinning their hopes on stronger household spending to drive growth as the mining boom fades, Mr Goyder said a case could be made for a period of higher confidence.
He noted the recovery in property and equity markets and said these could have a "wealth effect" - where people feel richer even if their incomes are unchanged.
"There's a number of factors that you could actually create a case that could lead to higher levels of confidence," he said. Consumer confidence jumped to its highest level since late 2010 in the days leading up to the election, the Westpac Melbourne Institute consumer sentiment index showed.
In contrast to calls for more interest rate cuts from retailers including Solomon Lew, Mr Goyder said he did not think making credit cheaper would boost spending, and it was important the Reserve Bank kept "firepower" intact.
He made the comments after releasing the priorities of B20 Australia - a group of business leaders that will give input into recommendations put to global leaders.
Trade will be a key goal, alongside investment in infrastructure.
In an environment of weak global growth, Mr Goyder quoted estimates that removing trade barriers could boost annual global growth by $US2.6 trillion ($2.73 trillion).
"There's a really big prize to remove some trade barriers, and I think for Australia ... there's a significant opportunity if that happens."
Frequently Asked Questions about this Article…
Wesfarmers' chief executive Richard Goyder said the company saw an 'election campaign effect' — weaker sales late in the campaign followed by a recovery after the poll as consumers reacted to greater certainty. He described the last weeks of the campaign as softer, with sales improving since the election.
Wesfarmers owns major retail chains that are tied to household spending, including Coles, Bunnings, Kmart and Target. These businesses typically feel direct impacts from changes in consumer confidence and retail sales.
The article notes consumer confidence jumped to its highest level since late 2010 ahead of the election. Higher confidence, together with recoveries in property and equity markets, can create a 'wealth effect' where people feel richer and may spend more — which can support retail revenues and investor sentiment in companies like Wesfarmers.
No. Richard Goyder said he did not believe making credit cheaper through interest rate cuts would necessarily boost spending, and he argued it was important the Reserve Bank keep policy 'firepower' intact rather than quickly cutting rates.
The 'wealth effect' refers to consumers feeling richer because of rising property and equity markets, even if incomes haven't changed. The article highlights Goyder's view that this sense of increased wealth can lift household confidence and spending, which is important for investors watching retail company performance.
B20 Australia, whose priorities were released by Goyder, is pushing for trade liberalisation and investment in infrastructure. These priorities aim to boost trade and could create opportunities for Australian businesses if global trade barriers are reduced.
The article quotes estimates that removing trade barriers could boost annual global growth by about US$2.6 trillion (approximately $2.73 trillion), highlighting the potential economic upside from trade liberalisation advocated by business leaders.
Goyder expressed caution, saying the post-election lift might be a short-term recovery — 'whether that's just a couple of soft weeks and a couple of strong weeks, time will tell.' Everyday investors should watch follow-up sales trends and broader indicators like consumer confidence and market conditions.
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