The latest quarterly update from Wesfarmers Ltd (ASX:WES) gives retail investors reason for optimism, what with all the fear in the sector recently. The retail conglomerate reported a set of solid results for sales at its retailers last quarter:
As you can see, continued strength in the Food & Liquor, Bunnings ANZ, department stores, and Officeworks was partly offset by heavy declines in Convenience, Bunnings UK, and Target sales.
Bunnings' UK and Ireland sales were attributed to continued poor performance at the recently acquired Homebase hardware store, while Wesfarmers experiments with rolling out pilot versions of its own Bunnings stores. Today's share price falls are likely related to the performance of Bunnings UK so far.
Convenience sales at the group's petrol stores also continue to plunge, and we have written several times previously about the future of Wesfarmers' and Woolworths Limited's (ASX: WOW) petrol station chains.
Declining fuel volumes have led to lower sales in the convenience channel and notably Coles is now aiming to "manage the business for an appropriate return and to focus on growing the convenience offering", which is a noted change from previous language.
I am not sure how the convenience offering can grow if fuel sales continue to fall – although there is solid argument to be made for stocking new product lines and so on – and I expect this segment may remain challenging.
Overall, it shows solid progress at many of Wesfarmers' most important businesses, although it is important to remember that these are just sales figures and don't reflect any changes in profit margins that might be occurring.
If Wesfarmers can continue to post bumper results, it may find itself in a better position to launch the mooted Officeworks and/or Kmart + Target IPO that the market continues to wonder about.
