The Distillery: Shop worn

Jotters wonder if Wesfarmers' disappointing results point to a problem at the top with one arguing the proof will be in the Christmas sales pudding.

Wesfarmers provided a rare disappointing sales result to the market yesterday, with Bunnings the lingering bright spot. The figures have commentators wondering if Coles boss Ian McLeod has lost his midas touch or whether it’s just a blip on the way to a further closing of the gap to Woolworths.

The big holiday seasons ahead will provide the answers, according to The Australian’s John Durie.

“First-quarter comp figures at Coles are traditionally the weak spot and the next six months will test whether McLeod has lost his magic with the Christmas and Easter sales to come.”

Durie says the naysayers, however, are already “calling his glory run as being all but over.”

Fairfax’s Elizabeth Knight isn’t one of those naysayers, though she believes the serious transformations witnessed at Coles “are a thing of the past”.

“Coles boss Ian McLeod calls it the second wave of transformation. The low hanging fruit has been harvested and getting returns above broader economic growth is going to be more difficult. (Wesfarmers boss Richard) Goyder says Coles is still taking market share, thanks to improving its product offer but mainly due to reducing prices. But there is a limit.”

The Australian Financial Review’s Chanticleer columnist Michael Smith, meanwhile, says the “jury’s out” on whether weaker than expected results from Wesfarmers yesterday can be turned around over the current quarter.

“High expectations that a change of government and an end to the Rudd-Gillard political circus would get consumers spending again have not materialised. Goyder says the election had a marginally negative impact on business. While there was a pick-up the week after the election this did not last long.”

Indeed, the environment is no better than it was pre-election, but Goyder is hopeful of a strong Christmas.

Wesfarmers wasn’t the only ASX 20 to command the headlines yesterday, with Newcrest’s AGM drawing plenty of attention in light of its disclosure scandal. The AFR’s Matthew Stevens notes chairman Don Mercer may have dodged a strike from shareholders but that is nothing worth celebrating.

“Newcrest chairman Don Mercer escaped from his final trial by shareholders without a formal strike but with reputational scars enough to reinforce the proposition that his decision to target a pre-Christmas retirement is thoroughly appropriate... It is hard to conclude anything but that Mercer’s unexpected clarification of board and executive succession was pivotal to the way the votes fell.”

Elsewhere, Fairfax’s Adele Ferguson labels Huawei a likely pawn in any free trade agreement with China. For Tony Abbott to get a FTA signed soon, Ferguson implies, he may need to rethink the current lockout of Huawei from NBN tenders.

That won’t be an easy political sell given the Gillard government’s shunning of Huawei due to “national security issues”.

Finally, the AFR’s Karen Maley ponders news of a return to growth in Spain and explains why the country is far from out of the woods, while The Australian’s Adam Creighton contemplates the challenges of being an economist with the recent Nobel prize winners providing the backdrop.

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