The Wesfarmers Ltd (ASX: WES) share price is trading broadly flat at $56.25 on Thursday following the release of its strategy briefing.
Listed below are a few key takeaways from the strategy briefing:
Wesfarmers’ retail businesses growing on a two-year basis
The company notes that its retail businesses have been cycling the impacts of COVID-19 in the prior year from mid-March. This has led to significant volatility in monthly sales growth results. However, on a two-year basis, all of Wesfarmers’ retail businesses have continued to record strong sales growth. Management believes this reflects their ability to provide safe and trusted environments while delivering greater value, quality and convenience for customers.
Online sales growth is moderating
As we have seen with ecommerce company Kogan.com Ltd (ASX: KGN), Wesfarmers has experienced a moderation in its online sales growth after customer traffic to stores increased. This has resulted in a reduction in online penetration. It has also led to the Catch business’ gross transaction value growth being negative since mid-March. However, management notes that overall online penetration remains above pre-COVID levels.
Industrials businesses performing positively
Wesfarmers isn’t just Bunnings, Kmart, Catch, Officeworks, and Target, it also has a range of industrials businesses. These include Covalent Lithium, QNP, and CSBP. Pleasingly, the company revealed that positive trading has continued in the industrials segment and good operating performances have been achieved.
Management spoke positively about its Kmart business and believes it is well-positioned for sustainable long term growth. It continues to drive the growth of Kmart by leveraging scale and product development capabilities, completing the store conversion program and delivering digital initiatives. Another positive is that Kmart Group now expects to incur pre-tax, one-off non-operating costs of approximately $60 million to $70 million in FY 2021 relating to Target store closures and conversions. This is a reduction from its previous estimate of $90 million to $110 million.