Retail group claims buyers’ price sensitivity

Even though low unemployment and strong levels of household savings are now driving demand, retail group Wesfarmers claims that rising interest rates and inflation are beginning to influence consumer behavior.

The owner of Bunnings, Officeworks and KMart said retail trading conditions have remained robust with solid sales through the 2023 financial year-to-date, but it sees some risks on the horizon.

“Over recent months, shopping patterns and customer feedback indicate some customers are becoming more price sensitive, as they try to manage household budgets,” Managing Director Rob Scott told shareholders at the company’s annual general meeting on Thursday.

“We see these conditions as an opportunity for our businesses, which are well known for their everyday low prices, to outperform relative to others in their markets,” he added.

Sales at its cashcow Bunnings business have been impacted by an unusually prolonged period of wet weat her, but overall growth continues to be supported by strong demand from commercial customers.

Sales growth from DIY customers has moderated from the high levels experienced through COVID, but remains positive, he said.

Officeworks’ sales are broadly in line with the prior year, but normalisation in demand for categories impacted by COVID such as office supplies, or print and create services, has been positive for the sales mix.

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Mr Scott noted that combined sales growth for the Kmart and Target chains have booked strong trading results for the year-to-date even when adjusted for the impact of lockdowns last year.

Kmart’s value and low-price points position it to meet customer needs and profitably grow market share in an environment where shoppers are more focused on value. Target will also benefit from progress in delivering on quality and style at affordable prices, he added.

However, sales at online marketplace Catch have declined through the year-to-date, with online demand moderati ng from very high levels recorded during periods of lockdown.

The group recently appointed Brendan Sweeney as the new CEO of Catch, and is focusing improving its customer offering while also investing to support scalability and long-term growth.

Mr Scott said results from the new Health division – which includes the recently acquired Priceline pharmacy business – have been pleasing, with improvements in performance relative to the lockdown affected previous year.

Wesfarmers, which also operates a chemicals, energy and fertilisers division said the business is benefiting from strong customer demand and elevated commodity prices.

Development of its Mt Holland lithium project in WA is meanwhile progressing well, with first deliveries of lithium hydroxide – used in electric vehicle batteries – expected in two years.

Ahead of the meeting, Wesfarmers shares closed 0.4 per cent higher at $44.54 in a firm Australian market.

With AAP.