Australia's Wesfarmers says Target sales hit hard by lockdown

(Reuters) - Australia's Wesfarmers Ltd WES.AX said on Tuesday that in-store sales fell in recent weeks at both its discount department stores, Kmart, and to a larger extent, Target, as measures to control the coronavirus outbreak kept shoppers indoors.

Australia’s strict social distancing measures and the closure of all non-essential businesses has helped control the spread of the novel conoravirus, but has also severely hurt most retailers aside from supermarkets and led to large layoffs in the sector.

Helped by strong growth in online purchases, sales across Wesfarmers’ financial third quarter at both operations were largely in-line with what was seen in the first-half, but Kmart’s momentum has recently moderated and Target’s sales faced significant decline, the retailing conglomerate said.

These trends were expected to persist while social distancing and isolation measures remain in place, with many tenants and activities within major shopping centres not operating, the company said.

“Given the high degree of fixed occupancy costs, a sustained decline in sales momentum will have a material impact on the profitability of Kmart and Target,” Wesfarmers said.

“While Kmart remains profitable, Target earnings have decreased significantly,” it said.

Challenges with Target’s performance are not new. Following a steep drop in the division’s sales during the half-year results announced in February, Wesfarmers said a number of initiatives were underway to address its underperformance.

In its announcement on Tuesday, the company said these plans include an “assessment of strategic options for a commercially viable Target” that it planned to disclose in further detail before June 30, 2020, once the review is completed.

Its hardware retail division Bunnings provided some relief, Wesfarmers said, with sales growth for the third quarter and the first three weeks of April speeding up over the first-half.

Reporting by Rashmi Ashok in Bengaluru; Editing by Chris Reese and Tom Hogue