The huge impact of the Delta and Omicron outbreaks on Kmart and Target has been laid bare, but there is one store that has outperformed.
Waves of new Covid-19 outbreaks have hammered the performance of Wesfarmers’ Kmart and Target chains, with sales plummeting and costs rising, while staff shortages have even forced it to cut trading hours in some stores.
In an update on Monday, the Perth-based group said total sales for the two companies fell 10.3% in the six months to December 31 from the same period a year earlier and 5. 2% compared to the first half of 2019-2020 – before the pandemic took hold.
It also reflects the permanent closure of 14 underperforming Target stores and 48 Target Country stores.
Just as trading picked up in the final months of the year with Delta easing restrictions, customer traffic to stores has taken a hit as the number of Omicron cases rises in several states, in particularly during the critical Christmas trading period, said Wesfarmers.
Wesfarmers has shelled out extra cash to keep stock levels high in a bid to counter global supply chain disruptions, but high levels of pandemic-related absenteeism at key distribution centers in NSW and of Victoria prevented enough product from being delivered to stores to meet customer demand.
This calendar year has so far proved equally challenging, with customer traffic to stores remaining ‘moderate’ while continued staff absenteeism has necessitated reduced trading hours in some stores and affected stock availability. , said Wesfarmers.
“These issues are expected to persist as Covid-19 cases and the number of team members required to self-isolate remain high,” he said.
Officeworks’ performance was also impacted by pandemic-related disruptions and costs, but a 44% increase in online sales from Target and Kmart helped the group falter in the first half, while the tech giant Bunnings hardware remains a lucrative business.
Wesfarmers expects to report net income of between $1.18 billion and $1.24 billion for the period, in line with current consensus expectations.
That compares to $1.39 billion for the previous first half.
Meanwhile, the way is clear for Wesfarmers to take over Priceline owner Australian Pharmaceutical Industries after rival bidder Woolworths pulled out of the fight earlier this month.