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Wesfarmers retail sales jump

Conglomerate Wesfarmers Limited (ASX: WES) has seen its retail sales rise at the fastest pace in two years, rising 5.7% in the three months to March to $12.2 billion.

Driven by strong growth at Coles, Bunnings and Kmart, Wesfarmers’ retail division continues to out-score rival, Woolworths Limited (ASX: WOW) in same store sales growth. Coles’ food and liquor sales climbed 6.6%, with same store sales rising 5.3%. It’s the 16th consecutive quarter of same store sales growth, beating Woolworths in 15 of them. Growth in Woolies’ food and liquor division for the March quarter was a much more subdued 3.1% (adjusted for Easter).

The hardware division, Bunnings, saw sales increase by 6.9%, with store-on-store sales up 4%. Total sales for the quarter were $1.9 billion, driven by four smaller format stores opening, and looks set to rise, with an additional 16 sites under construction at the end of March.

Kmart’s total sales increased 3.6% for the quarter, with a focus on lowering prices on everyday family items driving strong transaction and volume growth.

Officeworks, which sells consumer electronics, office equipment, furniture and supplies, saw a 0.5% increase in sales to $417 million, thanks to strong online sales growth, and assisted by the Federal government’s Schoolkids Bonus payments in January.

A warm summer and the earlier timing of Easter also had a positive effect on Target, with comparable store sales increasing 1.9%, but Wesfarmers noted that conditions had softened through the quarter, leading to higher inventory levels, with further clearance sales expected to affect trading results in the fourth quarter. Target is in the middle of a turnaround program, with results so far suggesting it’s on the right track.

Managing Director Richard Goyder said that the retail sales performance was pleasing, with the Coles and Bunnings results a highlight.

Foolish takeaway

While both Coles and Woolworths continue to report improving sales growth, it remains to be seen where the growth is coming from. Woolworths says it is growing market share, which appears to suggest that smaller players Aldi and Metcash Limited (ASX- MTS) backed IGA supermarkets could be losing market share.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Woolworths.

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