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No end in sight to Aust's consumer gloom: Wesfarmers
27/07/2012 - The head of one of Australia's retail giants fears there is no end in sight to the nation's consumer gloom — despite its flagship Coles supermarket boasting a hefty full year sales increase. Kylie Williams
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Wesfarmers managing director Richard Goyder made the comments as he reported sales at the conglomerate's Coles supermarket chain leapt 6.1 per cent to $33.7 billion in the 2011/12 financial year.
Goyder said he had not noticed any lift in consumer sentiment in the last six months and did not expect it to improve any time in the near future.
"I don't think we've seen much change in the external environment over the last six months," he said.
"I wish I knew (when things would change).
"Our baseline would be that things will tick along as they are now, so to get customers into your store you've got to have great value and service."
While customers appear to be flocking to Coles stores to fill their shopping baskets, things were different at Wesfarmers' Target and Kmart chains.
Target's sales dropped 1.8 per cent to $3.7 billion in the year to June 30, while those at Kmart were flat at $4.02 billion.
Target and Kmart sales had both saw sales rise about one per cent in the fourth quarter thanks to the federal government's carbon tax handouts and interest rates, but those payments were not enough to arrest the overall decline.
Sales at Wesfarmers' home improvement and office division, which includes Bunnings and Officeworks, leapt 4.7 per cent to $8.63 billion.
Goyder said the uplift in sales at Coles was driven by strong volume growth in customer numbers and products sold, particularly in the final quarter, as Coles engaged in a price war with rival Woolworths.
Food and liquor prices fell four per cent in the fourth quarter, taking the fall for the year to 2.9 per cent.
In the 2012 financial year, Coles' food and liquor sales rose 4.6 per cent to $26.2 billion, with comparable sales (excluding store openings and closures) up 3.7 per cent.
Goyder hit back at recent criticism that Coles and Woolworths had been bullying suppliers in order to keep their prices low.
He said in the past Coles was using too many suppliers in order to boost profits by set up rebates but this arrangement did not benefit customers.
"As you rationalise range there are always some winners and there are always some losers," he said.
"And when there are losers they tend to speak up. I understand that. It's human nature."
Morningstar head of research Peter Warnes said he was particularly impressed with the volume growth at Coles and Wesfarmers' home improvement business Bunnings, especially considering the challenging retail environment.
"Coles and Bunnings have quite robust numbers which have got to indicate they are confident they can grow the business," he said.
Goyder also said he did not expect any of Wesfarmers' businesses to be adversely affected by rising electricity bills due to the carbon tax.
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