Bunnings boom continues in October, Wesfarmers reports

Wesfarmers has reported its star hardware chain Bunnings grew sales 25 per cent between July and October.

Bunnings continues to be the standout performer for Wesfarmers. Picture: Peter Ristevski

Consumers undertaking home projects and renovations have sent sales for Wesfarmers’ hardware chain Bunnings rocketing since July. Similar strong sales growth experienced at Officeworks, Wesfarmers told investors ahead of its AGM on Thursday.

The Perth-based conglomerate however revealed that stock availability in some home products affected Kmart’s sales growth in July and August. Some progress had been made towards improving availability in recent months, despite long order lead times and recent industrial action at port terminals creating some challenges, the company said.

It also said that it expected costs of $15 million per quarter to maintain a COVID-safe environment across its retail businesses.

The Bunnings chain, which now accounts for the bulk of Wesfarmers earnings following the demerger of Coles, continues to be the star performer for the group with the trading update showing its resilience through the COVID-19 pandemic.

Bunnings posted total sales growth for July to October of 25.2 per cent and like for like sales growth of 30.9 per cent.

In Bunnings, strong sales growth has continued in both consumer and commercial segments, Wesfarmers said. Consumer sales remained particularly strong as customers spent more time undertaking projects around the home.

Excluding metropolitan Melbourne stores, which were closed due to stage 4 restrictions in the state, total sales growth of 29.3 per cent was recorded for the year to date.

“Good progress has been made on Bunnings’ digital agenda, with online sales penetration excluding metropolitan Melbourne of 1.5 per cent during the year to date, and digital engagement with both consumer and trade customers continuing to increase,’’ the company said.

At Officeworks, financial year to date sales rose 23.4 per cent and Wesfarmers online marketplace Catch total sales for the period rose 114.4 per cent.

“In Officeworks, sales growth has been supported by strong demand for technology and home office furniture products.

“Margin has continued to be impacted by changes in sales mix, particularly across Melbourne stores where higher margin categories, such as office supplies and print, copy & create, were disproportionately impacted.”

The company said excluding metropolitan Melbourne stores, total sales growth of 27.3 per cent was recorded for the year to date. Customers continue to respond favourably to Officeworks’ every-channel offer and online sales penetration, excluding metropolitan Melbourne, was 30.8 per cent in the year to date.

At Kmart total sales growth for the year to date was 3.7 per cent with like for like sales better by 9.4 per cent. At its stablemate Target total sales were down 2.2 per cent but like for like sales were up 9.9 per cent.

In Kmart and Target, continued growth in home, active and kids categories was partially offset by lower customer demand for apparel products. The government-mandated temporary closure of 38 Kmart stores and 32 Target stores in Melbourne impacted sales, partially offset by very strong online growth.

Wesfarmers said excluding metropolitan Melbourne stores, total sales growth of 12.1 per cent and 6.7 per cent was recorded for Kmart and Target respectively for the year to date. Digital capabilities within Kmart Group continue to expand and online penetration, excluding metropolitan Melbourne, of 7.8 per cent and 13.2 per cent was recorded for Kmart and Target respectively for the year to date.

Wesfarmers said stock availability in some home products impacted Kmart’s sales growth in July and August 2020. Work has progressed on the actions announced to address the performance of Target, with nine large format stores converted to Kmart stores and six Target Country stores converted to K Hub stores during the year to date. Early customer feedback and growth in transaction volumes and sales has been very encouraging, with initial trading results from converted stores exceeding expectations, Wesfarmers said.

Wesfarmers chief executive Rob Scott said that the trading performance across the group had been pleasing, with the businesses responding well to a period of significant uncertainty and disruption.

“Despite the challenging operating environment, the results across the group’s retail businesses reflect their continued focus on meeting the changing needs of customers and delivering greater value, quality and convenience while providing safe and trusted environments for customers to shop.

He said the group has continued to incur costs associated with providing a COVID-safe environment, and these totalled around $23 million for the period ending October.

“We expect to incur costs of approximately $15 million per quarter while the threat of COVID persists,” Mr Scott said.

“There have also been some costs associated with paid pandemic leave and the commitment to pay our Victorian teams through the lockdown.”