Crunch time for ‘su­per K’

The West Australian - - WEST BUSINESS - Sean Smith

Is Kmart los­ing its pull, or just tak­ing a breather?

There can’t be any sur­prise if the chain, a star of Aus­tralian re­tail­ing in re­cent years, has come off the boil.

Bright­ened, tight­ened and re­fo­cused on ev­ery­day prod­ucts un­der for­mer boss Guy Russo, Kmart had been go­ing gang­busters.

Over the past four years, it put most bricks-and-mor­tar, non-food Aus­tralian re­tail­ers in the shade by record­ing av­er­age head­line sales growth of nearly 9 per cent a year while in­creas­ing profit by 10 per cent-plus a year to more than $600 mil­lion be­fore in­ter­est and tax.

It’s an en­vi­able record of suc­cess but also one that be­comes more dif­fi­cult to re­peat with ev­ery pass­ing year, par­tic­u­larly given the pres­sures on con­sumer spend­ing.

Kmart couldn’t and wasn’t ex­pected to keep grow­ing at such sharp rates.

How­ever, the con­cern among share­hold­ers is the sever­ity of the sud­den fall and whether there is some­thing more se­ri­ous amiss at Kmart. In par­tic­u­lar, is the busi­ness now also fi­nally feel­ing the ef­fects of a tough re­tail cli­mate?

To­tal sales growth has gone from 8.6 per cent to just one per cent. Like-for-like sales plunged 0.6 per cent from 5.4 per cent growth pre­vi­ously.

Wes­farm­ers chief Rob Scott yes­ter­day sug­gested that the busi­ness may have be­come a tem­po­rary vic­tim of its own suc­cess.

He says Kmart’s stores and sup­ply chain had strug­gled to cope with the big in­crease in sale vol­umes trig­gered by the group’s price cuts last year.

Those short­com­ings are now be­ing fixed.

The next six to12 months will de­ter­mine whether Kmart’s De­cem­ber-half was an aber­ra­tion or whether there are more wor­ry­ing is­sues at play.

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