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' CEO Richard Goyder said the group has seen a post-election lift driven by an “election campaign effect” — weaker sales late in the campaign followed by a recovery after the poll as consumers returned once there was more certainty.
Wesfarmers owns major retail businesses mentioned in the article — Coles, Bunnings, Kmart and Target — and the company pointed to improved sales across its household-facing businesses since the election.
The Westpac Melbourne Institute consumer sentiment index jumped to its highest level since late 2010 in the days leading up to the election. For everyday investors, rising consumer confidence can signal stronger household spending, which helps retailers and the broader economy as the mining boom fades.
No. Richard Goyder said he did not think making credit cheaper would necessarily boost spending and argued the Reserve Bank should keep its “firepower” intact, contrasting with calls from some retailers for more rate cuts.
Goyder pointed to recoveries in property and equity markets that can create a “wealth effect” — people feeling richer even if incomes haven’t changed. That perceived increase in wealth can raise consumer confidence and potentially lift spending.
B20 Australia is a group of business leaders that will provide input to global policymakers ahead of the G20 summit. Goyder said trade liberalisation and investment in infrastructure are key B20 priorities to present to world leaders.
The article quoted estimates that removing trade barriers could boost annual global growth by about US$2.6 trillion (reported as roughly $2.73 trillion in the piece), a figure Goyder cited to underline the potential gains from greater trade liberalisation.
The main takeaways are signs of a consumer-sector pick-up after the election, the potential positive impact of higher consumer confidence and asset-price recoveries (the wealth effect), and the policy focus on trade and infrastructure. Investors may want to watch retailer results, consumer sentiment measures and central bank signals on interest-rate policy as these factors can influence retail earnings and market sentiment.
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