Chief Wesfarmers says consumers are keeping up, warning of macro risks

Despite the headwind, Wesfarmers has been well equipped to adapt to inflationary pressures given the fundamental and diversified nature of its products, and so far there has been no real change in shopping patterns, while overall consumer demand is still “quite healthy”.

“While it’s important to be aware of the risks associated with inflation, supply chain disruption and interest rates, there’s no need to panic,” he said.

Bunnings’ evolution

At Wesfarmers Strategy Day, Mr Scott outlined that existing businesses such as Bunnings and the Kmart Group, which also includes Target, had strengthened their capabilities.

Wesfarmers has also created growth verticals, such as new medical and digital units, and expanded its chemicals and fertilizer business through the Mount Holland lithium mine and the Kwinana processing plant. The processing plant converts the ore into rechargeable lithium hydroxide.

Wesfarmers retailers are Australia’s six largest retail brands with more than 150 million digital interactions and 40 million transactions each month and a network of more than 1,500 retail stores. It has more than $ 30 billion in retail sales.

The largest revenue generator is hardware giant Bunnings, which plans to develop deeper data analysis capabilities and provide more targeted communication for millions of shoppers and better productivity.

Over the last 10 years, Bunnings has evolved from a warehouse model offering about 34,000 hardware and home products to a multi-channel business with more than 110,000 home, commercial and lifestyle products.

CEO Michael Schneider is working to expand Bunnings’ home furniture solutions, strengthen its garden decor offerings and improve nursery services. Due to the expansion of reconstructions, the range of kitchens and bathrooms is expanding and design consultants are being introduced.

Bunnings is also interested in breeding needs and introduces new categories from collars, toys, bowls and litters to smart products for pets.

“We are putting together a new range of products to help caravan and motor home owners keep their homes on wheels,” said Mr Schneider.

In the first half of fiscal 2022, Kmart Group’s inventories were abnormally high as the company struggled with disruptions in the domestic supply chain and higher commodity prices. Levels in the second half should remain elevated.

CFO Anthony Gianotti said inventory investments across Kmart and Target were diverted to off-season lines to avoid the risk of excessive discounts.

Kmart Group chief Ian Bailey said retailers in the digital supply chain were working on several ways to improve the basic speed of delivering products from factories to the shelves without increasing costs.

“It’s about faster development cycles and faster time-to-market. So this flexibility will help us reduce inventory over time, ”he said.

Mr. Bailey said the domestic brand Kmart, Ankio, is approaching $ 6 billion, and the retailer has built up its data assets over the past three years, which include 5 million contactable customers. Kmart will try to increase the personalization of customers in the store and online, which, according to Mr. Bailey, will lead to higher sales.

Wesfarmers’ new digital unit, OneDigital, (excluding Catch Group) is now estimated to report a full-year operating loss of approximately $ 80 million in 2022, compared to a net loss of $ 10 million in 2021. That’s $ 30 million less than the previous estimate, but spending will be carried forward to the next fiscal year, when the operating loss is estimated at $ 100 million.

Mr. Scott expects this level of investment to decline over time.

Online ordering project

“Once we get through the hard work around this marketing investment, we’ll make it easier to shop across all of our digital channels in our retail stores,” he said.

After an unsatisfactory half, with losses higher than he expected at Catch, Mr. Scott expects the market to be profitable in the end, but more investment in automation will be needed in the next few years.

OneDigital CEO Nicole Sheffield said two weeks ago that Kmart and Target had joined his OnePass membership program by launching a free delivery service. Bunnings and Officeworks are due to join the program, and eventually the API Priceline chain will also join.

“This year we will also expand the program to the omnichannel offer. And we will launch the OnePass mobile application soon, “she said.

Ms. Sheffield, who joined Wesfarmers last year, wants to place Catch as a specialist in centralized online order fulfillment. Fulfilled by Catch is an investment in a state-of-the-art automated distribution center being tested in Kmart, with the possibility of expanding to other Wesfarmers retail divisions.

Emily Amos joined Wesfarmers as the new head of healthcare just one month after she blocked the API earlier this year and faced investors for the first time when she noticed that the API had been underinvested, and Wesfarmers would work to strengthen the competitiveness of pharmacists. focusing on product innovation, strengthening the online offering and leveraging the Sister Club loyalty program at Priceline.

Mr Scott said Financial audit Any acquisitions in the field of health would be seen by consumer optics and mentioned innovations in beauty and skin care products and said that the field of digital health could be interesting.

According to analyst Craig Woolford of MST Marquee, Wesfarmers has approximately $ 6 billion in debt capacity and could build an asset base in the area across community health, beauty and fitness centers.