The success of Target's turnaround strategy may just be in the early stages of blossoming, new figures from Wesfarmers' first half report indicates.
The turnaround strategy, which involves a focus on premium and exclusive designer ranges, closing unprofitable stores and prioritising online growth, has seen the business deliver total sales growth of 2.3% for the half - compared to a 4.3% decline in 2019.
Higher proportions of full-priced sales also played a role in the positive results, with Target delivering a comparable sales growth increase of 13% in the half, while online penetration was 15.9%.
Wesfarmers MD Rob Scott said that one of the driving factors for the results was a simplification of the business.
"Target’s profitability improved significantly in the half, reflecting a higher proportion of full-price sales and lower operating
costs, supported by the ongoing simplification of the business.
"Target also made enhancements to its product offer, particularly in apparel and soft home, and continued to prioritise online growth," he said.
For sister business Kmart, initiatives to enhance the customer offer proved to be good investments, with the retailer reporting a 7.1% lift in total sales growth.
New in-store retail technology and the development of data and digital capabilities helped Kmart achieve 9.1% comparable sales growth in H1 FY21.
"Kmart’s earnings growth for the half was driven by higher sales and lower clearance costs," Scott added.
"Kmart’s inventory position improved over the half, with higher stock weights in key product lines supporting trade through the Christmas period," he said.
During the period, Kmart's online sales penetration was 8.7%.
However, the retailer's results were partially offset by by increased online fulfilment costs, higher shrinkage and higher ocean freight charges.
During the period, 12 large format Target stores were converted to Kmarts, while seven Target Country stores became K Hubs.
For Wesfarmer's online eTailer Catch, both in-stock and marketplace sales drove growth.
In the half, Catch delivered gross transaction value growth of 95.6% to $610 million and grew its active customer base to 2.9 million.
"Catch’s earnings were impacted by accelerated investment in technology, marketing and fulfilment capacity to support future growth," Scott added.
Catch also integrated further with its sister brands in the half, making click-and-collect for Catch products available in select Target and Kmart stores, while Target launched on Catch Marketplace and Kmart was introduced to the Catch in-stock department.
Catch also expanded its brands across in-stock and marketplace, helping it to deliver revenue of $329 million for the half.
As the combined Kmart Group, the brands delivered a 9% increase in revenue to $5,441 million for the half.