THE chief executive of Wesfarmers, Richard Goyder, is yet to see change in fragile consumer sentiment but does not blame shoppers for remaining cautious amid the global economic malaise that has shrunk superannuation savings and cut home values.
He said retailers such as Wesfarmers, which owns Coles supermarkets, Bunnings hardware and Target and Kmart, would need to work harder to attract customers by offering better value.
Meanwhile, the best sales performance for Target and Kmart in years has provided further evidence that the government's cash splash to compensate households for the carbon tax has found its way into clothing, shoes, toys and housewares.
Mr Goyder, speaking yesterday after the release of Wesfarmers' full-year sales, said he had not seen a shift in consumer confidence since the start of the year and was not expecting an 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. "Our base line would be that things will tick along as they are now."
Wesfarmers said total sales at Coles rose 6.1 per cent to $33.7 billion, as food and liquor sales rose 4.6 per cent to $26.18 billion. Comparable food and liquor sales were 3.7 per cent higher for the year. For the fourth quarter, same-store sales growth rose 3 per cent to $6.5 billion, beating Woolworths for the 12th straight quarter.
But depressed consumer sentiment concerns retailers. A succession of interest rate cuts as well as billions of dollars in investment triggered by the mining boom has not been enough to give consumers more confidence.
"I understand why people are being cautious," Mr Goyder said. "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."
Target and Kmart were flat for the year, but in the fourth quarter sales at Target rose by 2 per cent to $915 million, with Kmart up 2.2 per cent at $927 million.
On a comparable store sales basis, Target sales rose 4.5 per cent and those at Kmart 2.1 per cent.
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.
Frequently Asked Questions about this Article…
What did Wesfarmers CEO Richard Goyder say about consumer confidence and retail spending?
Richard Goyder said he has not seen a change in fragile consumer sentiment since the start of the year and does not expect an improvement in the near term. He said shoppers are understandably cautious after the global financial crisis, falling asset values, lower house prices and weaker superannuation balances.
How did Wesfarmers say retailers should respond to cautious shoppers?
Wesfarmers said retailers such as Coles, Bunnings, Target and Kmart need to work harder to attract customers by offering better value, because depressed consumer sentiment means shoppers are more selective with spending.
What were Coles' full-year sales and food and liquor sales growth reported by Wesfarmers?
Wesfarmers reported Coles' total sales rose 6.1% to $33.7 billion. Food and liquor sales increased 4.6% to $26.18 billion, with comparable food and liquor sales up 3.7% for the year.
How did Coles perform on same-store sales in the fourth quarter compared to Woolworths?
For the fourth quarter Wesfarmers said same-store (comparable) sales growth at Coles rose 3% to $6.5 billion, and that Coles had outperformed Woolworths for the 12th straight quarter on that measure.
What sales results did Target and Kmart report, and what might be behind their stronger sales?
Target and Kmart were flat for the full year, but in the fourth quarter Target sales rose 2% to $915 million and Kmart sales rose 2.2% to $927 million. On a comparable-store basis Target was up 4.5% and Kmart 2.1%. Wesfarmers noted this was the best sales performance for them in years and suggested the government’s cash payments to offset the carbon tax helped drive spending into clothing, shoes, toys and housewares.
How did Bunnings perform in the full year and in the latest quarter?
Bunnings' full-year sales were $7.15 billion, up 5.6% year on year. Quarterly sales were 4.1% higher at $1.62 billion, with comparable-store sales growth for the quarter of 2.9%.
Why are Australian consumers remaining cautious despite interest rate cuts and mining investment?
According to Goyder, even a succession of interest rate cuts and billions of dollars of mining-related investment have not been enough to boost consumer confidence. He pointed to the lingering effects of the global financial crisis, including lower asset values, tightened business spending, weaker house prices and reduced superannuation equity balances as reasons households remain cautious.
What does the article suggest everyday investors should watch in the retail sector?
The article suggests investors should watch retailers' ability to offer better value to attract cautious consumers, comparable-store sales trends for Coles, Target, Kmart and Bunnings, and how one-off factors (like government cash payments) affect short-term retail sales rather than indicating sustained consumer confidence.
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