Coles sales growth slows to trickle as Woolies fights back

Pictures is the first Bunnings UK store in St Albans, Hertfordshire.The first Bunnings Warehouse store in the UK and Ireland opened its doors to customers today (Thursday 2 February) in St. Albans, Hertfordshire. The pilot store, on the site of the former Homebase in Griffiths Way, is a major step towards establishing the Bunnings Warehouse format in the UK??????s ????38billion-a-year home improvement and garden market.Photo: supplied . Photo: SuppliedHardware giant Bunnings was the only retailer in Wesfarmers’ stable to hit double digit sales growth in the third quarter, as fierce competition in grocery and a resurgent Woolworths punches a hole in Coles’ growth plans.

Comparable food and liquor sales at Coles increased by a skinny 0.3 per cent in the quarter down from 0.9 per cent in the second quarter and at a weaker rate than broker Citi’s estimate of a 0.5 per cent improvement.

Citi analyst Bryan Raymond expects Woolworths like-for-like sales to hit 3.5 per cent growth in the quarter, further widening the gap between the two dominant, grocery brands as Woolies reclaims the market share it gave away during its disastrous foray into large format Hardware through Masters Home Improvement.

Wesfarmers chief executive Richard Goyder characterised the performance of the conglomerate’s retail chains as “generally pleasing” given the later timing of Easter, which is believed to have benefited sales at other chains, including Woolworths.

He said most of Wesfarmers’ businesses built on the strong growth achieved in the prior corresponding period, referring to Coles impressive 4.4 per cent jump in comparable store sales for the third quarter of fiscal 2016.

But it was Bunnings that shouldered the heavy lifting for Wesfarmers’ retail brands in this latest quarter as Target’s total, like for like sales slumped by more than 18 per cent or 17.9 per cent on a comparable store basis.

Department store chief Guy Russo claimed the result reflected the “ongoing transition of the business” but he’s already managing expectations for the fourth quarter.

“During the quarter, the reset of merchandise disciplines was further progressed and the transition to everyday low prices continued, with higher levels of full price sales and lower levels of clearance activity achieved relative to the prior corresponding period,” Mr Russo said.

“Trading momentum is expected to remain challenging in the fourth quarter but reset merchandise disciplines are expected to support improvements in the quality of sales recorded.”

Target’s total sales for the financial year to date have fallen by 17.6 per cent to $2.2 billion and comparable store sales have slumped by 18.1 per cent.

By comparison, Wesfarmers said Bunnings built on its strong growth in prior periods to achieve 7.7 per cent total sales growth in the third quarter.

Managing director for the n and New Zealand operation Michael Schneider said the Bunnings result was particularly pleasing given the”varying market conditions during the quarter.”

Retail analysts claim Bunnings continues to benefit from the collapse and shut down of the Masters Home Improvement chain as shoppers that were loyal to Woolworths large format hardware stores swap over to Bunnings.

The result does not suggest the merger of Metcash’s Mitre10 with Woolworths Home Timber & Hardware business to create a $2 billion, second player in hardware is having any significant impact on Bunnings sales.

The Bunnings UK business achieved $400 million in sales in the third quarter and Wesfarmers said like for like trading basis, transactions increased by 2.2 per cent. It did not provide a like for like sales update as it had not completed the $705 million acquisition by the third quarter of 2016.

Bunnings UK (BUKI) Managing Director PJ Davis said trading during the quarter was negatively affected by the continued repositioning of the kitchen and bathroom offer, while the performance across other core home improvement and garden products was pleasing.

Wesfarmers launched its first UK Bunnings warehouse during the quarter and a second test store was opened on April 12.

Comparable sales from Wesfarmers one-time discount department store star Kmart, fell by 0.3 per cent in the quarter, despite a 2.5 per cent lift in total sales to $1.1 billion however adjusted for the late timing of Easter, total sales grew by 5.5 per cent or 1.6 per ent on a like-for-like basis.

The chain’s managing director Ian Bailey said it was a “solid” quarter for Kmart, with sales growth across the core range of home and apparel as well as a higher proportion of sales at full price.

“Sales were in line with expectations given the later timing of Easter and higher levels of clearance in the prior corresponding period, with more products sold at full price during the quarter,” Mr Bailey said.

No new Officeworks stores were opened during the quarter as Wesfarmers investigates a public float of the stationery and office supplies business.

Total sales improved by 9 per cent and unlike Coles and Kmart, they were “favourably” effected by the timing of Easter and year to date, sales have increased by 7 per cent to $1.5 billion.

Wesfarmers did not provide any update on its plans for Officeworks.

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