Pandemic shopping frenzy set to ease

22/02/2021

The shopping spree Australians embarked upon as the pandemic gripped has already peaked and is now set to ease, according to Wesfarmers. According to a recent news.com.au report, Bunnings and Kmart were the earnings machines behind Wesfarmers’ surge in half year net profit, alongside initial results from converted Target stores beating expectations – however the shopping frenzy now appears to have peaked.

After posting a near 15 per cent surge in net profit for the six months to December 31 of $1.39 billion, Wesfarmers Managing Director Rob Scott immediately pointed to strong sales and earnings growth across the retail businesses, including Officeworks, which has boomed as consumers were forced to work from home throughout the pandemic.

“On a combined basis, Kmart and Target delivered a record earnings result for the period. Sales and transaction volume uplifts from Target stores that have been converted to Kmart stores continue to be very encouraging and 19 stores were converted during the half … with initial trading results from converted stores exceeding expectations. Target’s profitability improved significantly, supported by strong demand and the ongoing simplification of the business.” Mr Scott said in the report.

Total online sales across the group more than doubled, excluding Wesfarmers’ Catch online marketplace where earnings were shaved by accelerated investment in technology, marketing and fulfilment capacity to support future growth, according to the news.com.au report.

Strong retail sales have continued into 2021, according to Wesfarmers, as Australians continue to shop for items and projects around the home while travel restrictions persist. Bunnings responded to the trend last year by upgrading in-store displays for kitchen and garage organisation products.

For now, Wesfarmers is wary in its outlook, noting the economy had recovered strongly but the continued impact of the health crisis on customer demand and operations was uncertain. According to news.com.au Wesfarmers expects softer retail sales growth from March “as the businesses begin to cycle the initial impacts of COVID in the prior year, particularly in Bunnings and Officeworks”.

This means that sales will not be as strong as they were at the peak of lockdowns, presumably amid hopes the vaccine rollout will start to see work and home life return to relative normality.