‘Honeymoon is over’
Bunnings, Kmart boss makes big retailing admission
boss of Bunnings and Kmart owner Wesfarmers has warned that “the honeymoon is very much over” after years of ultra-low interest rates and pandemic cash handouts.
Rob Scott was speaking to investors and analysts at the Perth-based retail conglomerate’s strategy day in Sydney, where he said shoppers were now looking for value and opting for cheaper categories, The Australian reported.
“I would say that now the honeymoon is very much over,” he said.
“It was also one of the only times at least in the last few decades that I can recall where value wasn’t as important for households when they had very high levels of accumulated savings, very low interest rates, and value was not as important.”
He noted that customers were now “trading down categories, they are looking for value-oriented products, this benefits us and the core of what our businesses do”.
“We expect value to become even more important for customers, and we are seeing that today,” he said, according to The Australian Financial Review.
Wesfarmers, which also owns Target, Officeworks and Catch Group, flagged potential growth in health and lithium.
Mr Scott said cost of doing business pressure was “coming back, domestic costs, costs increasing and I feel we are pretty well positioned to deal with that”, while also noting population growth surging after Covid was “clearly a positive for many of our businesses”.
He also warned that upward pressure on wages was “shining a light on productivity issues”.
“The downturn in labour productivity coming out of Covid is quite a challenge for business to push wages up at a high level when productivity is going backwards,” he said.
Bunnings boss Mike Schneider said the chain was looking at opportunities in its new power tools business and pet products, after Australian Bureau of Statistics data in March showed hardware industry sales went backwards.
“As we look across the other categories, and given the diversity of those, we see categories that have experienced good growth … cleaning and obviously new categories like pets,” he said.
In March, Bunnings launched a major pet range expansion with more than 700 new products including toys, bedding, grooming tools, carThe riers, training accessories, smart technology and flea and worm treatments.
Meanwhile, Ian Bailey, head of discount chain Kmart, told investors he was targeting Gen Z and beauty as key growth areas. “Beauty is a category where we see a strong consumer demand for value, especially amongst younger customers,” he said, The Australian Financial Review reported.
It came as the Treasury’s top bureaucrat, secretary Steven Kennedy, warned inflation would not be back within the Reserve Bank’s acceptable margin “quickly” but will stabilise within two years.