Discount department stores Target and Kmart have joined the list of retailers experiencing difficulty in the market, with Wesfarmers today reporting lacklustre full-year sales for both companies.
According to the results for the 2011 financial year, Kmart achieved flat total sales of $4.0 billion, just in line with last year, while Target suffered a drop of 1.2 per cent ($3.8 billion), compared to the previous corresponding period. Comparable store sales for Target were also down by 1.2 per cent, while Kmart comparable store sales increased slightly, by 0.3 per cent.
However, sales during the fourth quarter alone increased for Target, with total sales rising by 2.9 per cent to $897 million and comparable store sales up by 2.7 per cent. Kmart's isolated fourth quarter sales results by comparison, declined by 0.8 per cent to $907 million, while comparable store sales saw a drop of 0.1 per cent.
Despite sluggish sales, Wesfarmers managing director Richard Goyer said the retail division's sales performance was solid, given the backdrop of declining consumer confidence, significant price deflation and adverse weather conditions experienced during the period.
“As households have experienced higher costs of living and increased propensity to save, all of the group's retail businesses have worked hard to provide genuinely better value and an improved customer offer,” he said.
“Target experienced difficult trading conditions throughout the year, with total sales declining, as price deflation across the store constrained sales despite solid underlying growth. Kmart's total sales were broadly flat for the year, as investment in everyday low prices offset significantly increased volumes, particularly in Apparel and Home categories.”
Target managing director Launa Inman said difficult and erratic trading conditions continued in the fourth quarter.
“While sales have improved from the third quarter, trading remained inconsistent during the period with a noticeable weakening in sales in June, and conditions are expected to continue to be difficult into the first half of the next financial year,” she said.
“Within this environment the customer response to the launch of our on-line store at the end of February has been pleasing. At this stage the on-line offer is focused on children's apparel, baby and nursery items and selected bathroom ranges with additional categories to be added over the coming months.”
Kmart managing director Guy Russo said sales in Apparel and Home departments performed in line with expectations, whereas sales in categories previously driven by promotional activity were subdued in comparison.
“Despite a difficult retail trading environment delivering flat sales growth, our customer transactions and volumes continued to grow on last year, with customers recognising the value in Kmart’s everyday low price offer. We remain committed to bringing great everyday value to families so they can buy what they want, when they want it at our lowest possible price,” he said.
During the fourth quarter, both companies have continued to invest in their stores, with Target refurbishing 17 stores during the period, taking total store refurbishments completed in the financial year to 65, and Kmart renovating floors and fitting rooms in a further two stores.
Target Australia launched its e-commerce site – shop.target.com.au – in February this year, joining Kmart and other department stores such as Myer, Big W, and David Jones, who have also recently added online shops to complement their bricks-and-mortar outlets.