Wesfarmers has reported food and liquor sales were up by 6.7% to $7 billion in the company’s second quarter, but also warned that it is facing tough times as customer confidence remains low and the threat of deflating rises.
Total Coles sales were up by 6.7% to $8.8 billion, with 6.6% comparable store sales growth. Home improvement and office supplies sales were up by 4.7%, with Kmart sales up by 0.8%.
Sales were also good in other divisions. Officeworks recorded a 4.2% increase in second-quarter sales to $346 million, while hardware chain Bunnings recorded 2.4% store-on-store growth.
Target recorded the most disappointing figures, with comparable store sales falling 4.2%. Target managing director Launa Inman said customer numbers and sales had risen over the quarter, which will help improve the chain’s performance.
“The result reflects the impact of price deflation across the market along with measures taken to clear seasonal stock,” she said.
Chief executive Richard Goyder said in a statement that although the results are strong, given the weak environment for consumer confidence, he warned that food and liquor deflating is at 0.2% in the second quarter and it’s an issue the company is watching.
“Trading for the quarter, including a very strong Christmas week, was driven by ongoing product innovation, improving store standards and availability and continuing investment in value for customers,” he said.
The comments come as Coles and Woolworths are embroiled in a pricing war, with bread and milk falling to as little as $1 in some instances.
Wesfarmers shares were up by 0.4% to $33.90 this morning.
The Australian sharemarket has fallen today, following weak leads from Wall Street last week with investors timid due to the ongoing turmoil in Egypt and the Middle East.
The benchmark S&P/ASX200 index was down by 46 points or 0.98% to 4728 at 12.20 AEST, while the Australian dollar also remained lower at US98c.
Commonwealth Bank shares dropped 0.7% to $52.03, while NAB shares lost 0.5% to $24.32. Westpac dropped 0.8% to $22.72 as AMP lost 1.1% to $5.34.
The TD Securities-Melbourne Institute inflation gauge was up by 0.4% in January, compared to a 0.2% rise in December.
TD Securities head of Asia-Pacific research Annette Beacher said the figure was surprising given the economy is heading for full employment.
“While the Inflation Gauge reported stronger price pressures over the timeframe, at this stage we suspect the difference is down to timing,” Beacher told AAP.
“This month’s Inflation Gauge report shows benign inflation in January, outside of the expected spike in fresh produce prices, but we are mindful of many conflicting seasonal price movements in this reference month.”
The Commonwealth Bank has set up a new $50 million fund it says will help hundreds of home insurance customers who were hit by the recent floods.
“This $50 million compassionate fund will go a long way to take some pressure off the appeal fund by providing people who have been paying their insurance, but might not be covered by the definition, with some assistance,” Queensland premier Anna Bligh told reporters.
“I’m very pleased the Commonwealth Bank has heeded my calls… I think this is a lead every other insurance company can follow.”
New Zealand building supplies group Fletcher Building has increased its bid for Crane Group, adding a further $44 million to the deal, which reversed the position of the board.
“Our discussions with Crane have reinforced the strategic rationale of this transaction,” chief executive Jonathan Ling said in a statement.
Crane originally turned down a $754 million offer as undervaluing the company, but it has now turned around, saying that the new valuation is appropriate.
One major change is that Crane’s interim and special dividends will now not affect the cash payment.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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