WESFARMERS boss Richard Goyder is yet to notice a change in fragile consumer sentiment, but says he understands shoppers' caution at a time when their superannuation savings have shrunk and the value of their homes has fallen.
Mr Goyder said retailers such as Wesfarmers, which owns supermarket group Coles as well as hardware giant Bunnings and apparel stores Target and Kmart, needed to work harder in the challenging trading environment to attract customers by offering better value for money.
Speaking yesterday after the release of Wesfarmers' full-year sales, he warned he had not seen a shift in consumer confidence since the beginning of the year and was not expecting any improvement in the near term.
"I don't think we have seen much change in the external environment over the last six months," he said.
"I don't think there has been much change whatsoever. Our base line would be that things will tick along as they are now."
Wesfarmers said its flagship Coles chain had lifted total full-year sales by 6.1 per cent to $33.7 billion, as food and liquor sales rose 4.6 per cent to $26.18 billion. Comparable full-year food and liquor sales were 3.7 per cent higher, while for the fourth quarter same-store sales rose 3 per cent to $6.5 billion beating larger rival Woolworths for the 12th straight quarter.
But the downbeat state of the average shopper remains a bugbear for retailers and is causing disquiet among policymakers.
A succession of interest rate cuts this year (and four rate cuts since November), as well as billions of dollars in new investment triggered by the mining boom, still had not been enough to change their behaviour.
"I understand why people are being cautious," Mr Goyder said, "because I think, if you step back, we have been through a period in the global financial crisis where, and subsequently, you have had asset values fall, businesses tighten up on a whole bunch of things, house prices over time that declined a bit and superannuation funds where equities have come back.
"I do share with others the view that the Australian economy is in relatively great shape and I'd rather be doing business in Australia than most other places in the world at the moment."
The conglomerate's merchandise chains, Target and Kmart, were flat to slightly negative for the year, but in the fourth quarter the government's household assistance package and an early toy sale helped lift sales at Target by 2 per cent, to $915 million, with Kmart's sales 2.2 per cent better at $927 million.
On a comparable-store sales basis, Target's sales rose by 4.5 per cent and Kmart was 2.1 per cent better.
At its hardware juggernaut Bunnings, full-year sales hit $7.15 billion, up 5.6 per cent, with quarterly sales 4.1 per cent higher at $1.62 billion. Comparable-store sales growth for the quarter was 2.9 per cent.
Wesfarmers will release its full-year profit result next month.
Shares in Wesfarmers rose 27?, or 0.8 per cent, to close at $32.25.
Frequently Asked Questions about this Article…
What did Wesfarmers boss Richard Goyder say about consumer confidence and shopper caution?
Richard Goyder said he hasn’t noticed a material change in fragile consumer sentiment and understands shoppers are cautious because superannuation and house values have fallen. He warned he doesn’t expect a near-term improvement and expects conditions to “tick along” as they are now.
How did Coles perform in Wesfarmers’ full-year sales update?
Wesfarmers reported Coles lifted total full-year sales by 6.1% to $33.7 billion. Food and liquor sales rose 4.6% to $26.18 billion, comparable food and liquor sales were up 3.7%, and fourth-quarter same-store sales increased 3% to $6.5 billion — beating rival Woolworths for the 12th straight quarter.
What were Bunnings’ sales results and comparable-store growth?
Bunnings’ full-year sales reached $7.15 billion, up 5.6%, with quarterly sales 4.1% higher at $1.62 billion. Comparable-store sales growth for the quarter was 2.9%.
How did Target and Kmart perform over the year and in the fourth quarter?
Target and Kmart were flat to slightly negative for the full year. In the fourth quarter Target’s sales rose 2% to $915 million and Kmart’s sales were 2.2% higher at $927 million; on a comparable-store basis Target was up 4.5% and Kmart 2.1%. The government household assistance package and an early toy sale helped lift Target’s quarter.
Did interest rate cuts or the mining boom change consumer behaviour, according to the article?
The article says a succession of interest rate cuts this year (and four rate cuts since November) and billions of dollars in new investment from the mining boom still had not been enough to change shopper behaviour or lift consumer confidence.
When will Wesfarmers release its full-year profit result?
Wesfarmers will release its full-year profit result next month, according to the article.
How did the market react to Wesfarmers’ sales update and what was the share price movement?
Following the sales update, Wesfarmers shares rose about 0.8% to close at $32.25.
What should everyday investors take away from Wesfarmers’ sales update about the retail sector?
The update suggests retailers need to work harder to lure cautious consumers by offering better value: Coles and Bunnings showed solid sales growth, while apparel/merchandise chains like Target and Kmart were weaker for the year but improved in the fourth quarter. Everyday investors may want to watch consumer sentiment, upcoming profit results and how retailers adapt pricing and promotions.
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