Australian conglomerate Wesfarmers Limited’s earnings have reportedly taken a hit amidst growing consumer fears and staff shortages across stores over the past few months, as per the company’s half-year earnings update.
Wesfarmers, the parent company of retail chains Target, Kmart, Bunnings, and Officeworks, stated that retail trading conditions declined in the final two weeks of 2021 calendar year, with customer traffic in stores remaining restrained in the first half of January.
During the six months period that ended in December, the early part saw a drop in sales due to government-enforced restriction, but later in December and January when physical stores had reopened, new challenges emerged with scarcity in staff and rising fear among consumers.
Wesfarmers had to report a combined 10% drop in sales for Kmart and Target, which are its discount department stores, in the six months to December 2021 due to low traffic of customers and early lockdowns.
Kmart Group, which also has an online marketplace division, Catch Group, is expected to have earned between $170 million and $180 million for the December half, before taxes. During the same period last year, the unit had delivered a profit of $487 million.
In addition to weakening consumer demands, retailers also had to suffer increased costs and put up discounts to reduce inventory and logistics, while also managing and paying staff who were isolating and finding staff to manage their stores and distribution centers.
Managing inventory also became a burden due to the exceptionally uncertain demand during this period.
While discretionary retail such as Target, Kmart, and Officeworks bore a hard hit, Wesfarmers did not give a clear figure regarding the earnings of its flagship chain, Bunnings, a household hardware chain, only stating that it reported a pleasing performance in the December half.
With Bunnings seeing better customer traffic, possibly owing to people taking up DIY projects while forced to stay indoors, and few divisions, like Wesfarmers Chemicals, Energy & Fertilizers, noting strong trading performance, Wesfarmers is expected to have net earnings between $1.18 billion and $1.24 billion in the December half.