Shoes get the boot but Kmart’s kicking goals

Kmart continues to overperform, while Target underperformed in the second quarter.

West Australian-based shoe retailer Betts Group is up for sale, according to sources, the latest victim of tough retail conditions — but Woolworths and Wesfarmers are about to present surprisingly strong department store sales figures for the Christmas period.

Despite the negative sentiment surrounding discount department stores, sources say that Wesfarmers is preparing to report that Kmart continues to overperform, while Target underperformed in the second quarter.

The understanding is that figures so far indicate that comparable sales for Target and Kmart collectively increased 5 per cent for the December quarter, compared to the previous corresponding period.

There is speculation Kmart sales may have even increased at least 10 per cent on the previous corresponding quarter under the leadership of Guy Russo.

Wesfarmers declined to comment on the numbers but will report its December quarter results on February 21. For the first quarter of the 2018 financial year, Wesfarmers reported sales had increased 3.8 per cent for its department stores, with Kmart up 9.4 per cent and Target down 6.4 per cent.

Also improving is Woolworth’s Big W, which is said to have turned the corner by remaining focused. New executives joining the ranks are also paying dividends, market analysts say.

Big W is expected to narrow its losses this year. Yearly sales are expected to lift, but remain lower over a two-year period.

Part of the problem for Woolworths was that last year, the group remained focused on the liquidation of its Masters hardware chain and had not yet focused on Big W, which has been seen as one of the most likely retail victims of digital disruption, along with Target.

The latest results could mean that both Wesfarmers and Woolworths opt to retain the discount department stores rather than sell them, as many had expected.

Meanwhile, the family-owned shoe store company Betts is believed to have buckled under the pressure of tough trading conditions.

The business has a turnover of about $200 million and operates in all Australian states, with 206 stores trading under names including Betts, Zu and Airflex.

The business is owned by the Breckler family who turned the operation into the largest privately owned Australian footwear retailer during the 1980s and 1990s.

Footwear is proving to be one of the hardest-hit areas in retail.

In 2016 Payless Shoes collapsed, one of Australia’s largest independent shoe retailers with 131 stores and annual sales of about $75 million.

Allegro Funds is one of the private equity funds that has been capitalising on the space.

Last year Allegro bought Number One Shoes (NOS) and Hannahs — two well-known NZ footwear brands — and it could acquire Betts.