Crunch time for ‘super K’
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.