Announcing the half-year results, Managing Director Rob Scott said: “pleasing progress” continues on Wesfarmers’ digital strategy. Bunnings, Kmart and Officeworks continue to deliver topline growth for Wesfarmers while Target was “below expectations”.
Investment in e-commerce capabilities, digital and technology initiatives have helped the Perth based conglomerate to achieve online sales growth of 35%. Delivering a net growth of 5.7% after-tax profit, Wesfarmers boss Rob committed to digital strategy and technology investments “preparing the group for future growth”.
Digital and omnichannel capability is a critical area for other retailers as well. Woolworths, Coles and other retailers have been focused on digital growth as a critical element of overall growth strategy. Super Retail Group’s ongoing $2.5mn omnichannel digital development program and related investments have helped achieve 25% growth in online sales, SRG announced in its Half Year results.
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Headwinds
Wesfarmers doesn’t seem to be immune from the “underpayment epidemic” admitting underpayment at Target and Bunnings. The conglomerate has set aside $9mn to repay taking the total to about $30mn.
Wesfarmers is closely monitoring the COVID-19 outbreak and its impact on product availability due to supply chain challenges. Revealing the current impact is minor, Wesfarmers acknowledged it remains a dynamic situation that is progressing daily. Although there is no indication of any reduction in digital investments, any impact of COVID-19 outbreak and underpayment troubles on technology roadmap seems unlikely yet although Target remains a concern.
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Sub-par Target performance
Kmart sales increased $241m, more than offsetting a $67m decline in Target. The Catch acquisition has also improved digital expertise leading to better execution and innovation.
On the back of its solid growth, Kmart continues investment in digital and technology. Although Target’s performance has been “below expectations”, Kmart has budgeted $15mn for technology and digital enhancements aligning with growing consumer expectations and changing shopping behaviour.
Officeworks delivered an impressive 11.5% growth while Kmart and Bunnings have delivered 7.5% and 5.3% respectively. Managing Director (Acting) Michael Howard plans continued investment in ‘every channel strategy with ongoing enhancements targeting improved online customer experience. Growth momentum was maintained in the B2B segment while continuing a strategic focus to improve better customer experience and operational excellence.
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Also read: Coles re-platforms digital channel and doubles online capacity
Offshore Technology Centre
Bunnings announced setting up of a Technology Centre in Bengaluru which is not surprising. As tech talent becomes central to digital strategy and tech initiatives, the Bengaluru centre is aimed at sharpening Bunnings’ technology edge. It is no secret Bengaluru is the destination to recruit tech talent and Bunnings doesn’t seem to be missing on that important tech link.
The investments in data and digital transformation continue with an additional $10mn budget with the data and analytics initiatives enhancing productivity and inventory optimisation.
Click and Collect, an important bridge between “click” and “brick”, continues to be a growth element for the Wesfarmers companies. Click and Collect has been scaled to 100 stores, with plans to expand in New Zealand.
Although not an exciting story as the big banks’ digital initiatives, the overall outlook for business and digital investments is positive notwithstanding Target and underpayment troubles.
