Wesfarmers takes hit

SHARES in Wesfarmers fell yesterday after the company unveiled a mostly weak third quarter for its retail businesses, including softer growth from its supermarket giant Coles.

Coles’ food and liquor sales rose 1.2 per cent to $7.6 billion in the 12 weeks to March 26, but its key comparable food and liquor sales growth was 0.3 per cent, significantly weaker than the 4.9 per cent growth in the corresponding period a year ago.

That continues Coles’ trend of shrinking comparable sales growth – 0.9 per cent in the second quarter and 1.8 per cent in the first – in a sign it is losing customers to major supermarket rivals Woolworths and Aldi.

Coles’ comparable food and liquor sales increased 0.7 per cent after adjusting for the timing of Easter, which this year fell in the fourth quarter.

Investors were not impressed with the trading update, driving Wesfarmers’ share price down 1.5 per cent to $43.30.

Macquarie analysts said Wesfarmers’ retailers produced a generally weaker result across the board, with some really poor outcomes from its convenience and Target segments.

“The growth environment is tough currently and, as a result, there are only a couple of strong positive comparable growth performances in this result,” they noted in a report yesterday.

“(It’s) hard to see earnings momentum responding positively under such circumstances.”

Comparable sales at Target fell 17.9 per cent, with total sales declining 18.1 per cent to $555 million as Wesfarmers continues its overhaul of the department stores. “Trading momentum is expected to remain challenging in the fourth quarter,” department stores chief executive Guy Russo said.

Elsewhere in the business, comparable sales fell 0.3 per cent at Kmart – lifting 1.6 per cent after adjusting for the timing of Easter – but rose 6 per cent at home improvement chain Bunnings.

The group’s comparable fuel volumes fell 22 per cent and its comparable convenience store sales decreased 0.8 per cent.