Wesfarmers has released an update on the impacts of COVID-19 on trade as well as the measures it has taken to overcome the pandemic's challenges.
The business said that while Bunnings, Officeworks and Catch have all witnessed strong sales, it has been more diffcult for Kmart and especially Target.
Wesfarmers said that in-store sales at the department stores have slowed in line with social distancing measures as well as declines in discretionary categories such as apparel.
Sales growth in the third quarter for Kmart and Target was broadly in line with the levels achieved in the first half of the financial year, supported by strong growth in online sales.
However, in recent weeks in-store sales momentum has slowed in Kmart and has declined significantly in Target.
Margins at the retailers has also been impacted by higher levels of clearance activity and the increased cost of online fulfillment. While Kmart remains profitable, Target earnings have decreased significantly.
To combat the underperformance of Target, Wesfarmers has decided to accelerate its plans to improve the financial performance of the retailer.
First announcing the plans to review Target in February 2020, the Group will now analyse of a range of actions to improve shareholder returns and conduct an assessment of strategic options for a commercially viable Target.
What actions it will take specifically to execute this plan will be announced before June 30, however it is expected that some stores may close.
Wesfarmers MD Rob Scott said that despite slowing in-store sales, the Group had introduced new initiatives to support online sales growth.
"Each of the Group’s businesses has implemented a number of changes to protect the health and safety of team members and customers, including store-based measures to support social distancing requirements, the roll-out of protective screens at registers and increased levels of personal protective equipment for team members.
"These changes have supported continuity of business operations and the associated benefits to customers, suppliers and jobs.
"In recent weeks, our retail businesses have also made significant progress in further enhancing their respective digital offers while responding to the substantial increase in online sales.
"This includes the implementation of Drive & Collect by Bunnings and Officeworks, enabling contactless carpark collection by customers, and the conversion of three Kmart locations to ‘dark’ stores to support its growing online business," he said.
Scott added that sales of the Group's 4.9% and 5.2% interest in Coles in February and March (respectively) has helped strengthen the balance sheet.
"COVID-19 has had a profound impact on our way of life and business operations and the actions we are taking with our balance sheet and in our businesses are focused on sustaining performance in an uncertain future.
"We recognise that this is an uncertain and worrying time for many team members and customers.
"Across the Group, we remain focused on the health and safety of our team and our customers and the actions we can take to support our team, our customers, our suppliers and the community," he said.