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Wesfarmers Ltd and Woolworths Limited to battle it out this week

It’s a big day today for shareholders in Wesfarmers Ltd (ASX: WES) with the group reporting both its third quarter retail sales results and its quarterly statement of production, development and exploration.

Overall the sales results from retailing were pleasing with Wesfarmers’ reporting a 3.6% increase in sales at Coles and an impressive 11.3% increase in sales from home improvement and office supplies. Target and Kmart produced less compelling figures with a decline of 3.6% and a gain of just 0.4% respectively over the previous corresponding quarter.

Commenting on the results, Wesfarmers’ Managing Director Richard Goyder stated that they continued to reposition Target’s “offer towards less promotional dependence with a view to securing long-term, sustainable growth.” Goyder also mentioned that Kmart had faced challenging conditions in the entertainment categories. These two problem areas however were well and truly offset by the solid gains from the major business lines of Food and Liquor as well as the Bunnings and Officeworks segments.

Turning to the results from Wesfarmers’ coal division, production volumes enjoyed a boost thanks to better weather conditions and the absence of a scheduled maintenance shutdown, For the March quarter, total coal production was 9% higher than the previous December quarter. The higher volume is definitely a positive but of course the realised coal price will ultimately determine the returns for shareholders.

Foolish takeaway

With fellow supermarket giant Woolworths Limited (ASX: WOW) due to report its March quarter sales figures on Wednesday, there is not long to wait before a comparison between the two can be drawn. Given the outstanding 12.3% total growth and 7.8% same-store growth achieved at Bunnings, the sales figures from Woolworths’ upstart Masters Home Improvement division will no doubt be particularly closely scrutinised come Wednesday.

With The Australian Financial Review reporting that some analysts believe Coles’ sales growth may have dipped below that of Woolworths’ supermarket division for the first time in five years, Wesfarmers’ shareholders should also brace for the possibility of some volatility on Wednesday.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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