Target takes a 'significant' hit to sales and falls WAY behind Kmart as coronavirus takes its toll and owner warns of 'inevitable' store closures
- Target's 'unsatisfactory' financial performance under review from Wesfarmers
- Department store chain's sales have slumped significantly in recent weeks
- Figures prompted planned review into commercial viability to be fast-tracked
- Sister chain Kmart remains profitable despite deteriorating trading conditions
- Here’s how to help people impacted by Covid-19
Target owner Wesfarmers has fast-tracked a review into the commercial viability of the struggling retailer after a worse than expected slump in sales.
The department store chain's revenue and profits have taken a 'significant' hit during the coronavirus lockdowns, which have left shopping centres deserted as retailers temporarily close their doors.
Wesfarmers chief executive Rob Scott highlighted Target's 'unsatisfactory' financial performance in a trading briefing to investors on Tuesday, and said store closures were 'inevitable'.
While sister department store chain Kmart remains profitable in deteriorating trading conditions, Target's earnings have slumped significantly.
Wesfarmers has fast-tracked a review into the 'unsatisfactory' performance of Target (pictured), which may result in the closure of some stores
The sharp sales decline prompted a planned review into Target's operations to be accelerated, which will be completed by June 30.
'These plans include a review of a range of actions to improve shareholder returns and assessment of strategic options for a commercially viable Target,' Mr Scott told investors.
He has since said store closures were likely.
'The future of Target will inevitably be a smaller number of stores and a much stronger online business, and it should be able to be a successful, profitable and growing business on that basis,' Mr Scott told Fairfax newspapers.
When asked if the business could be sold, Mr Scott admitted 'all options are on the table'.
He added large-format stores and associated high rental costs were unsustainable in the current trading environment.
We don't see those sites being commercially viable over time,' Mr Scott said.
Share this article
Daily Mail Australia has contacted Wesfarmers for further comment.
In February, Kmart swung to a 5.5 per cent first-half comparable sales growth from a 0.6 per cent decline a year ago, with revenue at the discount department store up $241million or 7.6 per cent to $4.99billion.
Target's comparable sales went the other way, though, falling 2.3 per cent compared with 0.5 per cent growth a year ago as it recorded a worse-than-expected $67million sales slump.
'In recent weeks, in-store sales momentum has moderated in Kmart and has declined in Target, reflecting the broader decline in customer footfall shopping centres and ongoing weakness in discretionary categories, particularly apparel,' Mr Scott told investors.
While sales have slumped for Target, in-store momentum has moderated in popular discount department store chain Kmart (pictured), despite the coronavirus lockdowns
The current trend of declining sales is expected to persist while social distancing and isolation measures remain in place.
'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,' Mr Scott said.
'Margins have also been impacted by higher levels of clearance activity and the increased cost of online fulfillment.'
The sales figures were much better for Bunnings and Officeworks, which have experienced significant growth demand in the last two months due to the large numbers of Australians holed up at home.
Wesfarmers says a decline in in-store sales will continue declining sales is expected to persist while social distancing and isolation measures remain in place. Pictured are shoppers in Sydney's deserted Pitt Street Mall on Monday
The demand contributed to Wesfarmers maintaining a strong balance sheet, despite the pandemic crisis.
'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,' Mr Scott said.
Target is Australia's largest department store chain with 284 stores across the country.
Established in 1926, the retailer was originally known as Lindsays until 1968, when Myer Emporium bought the chain of 16 stores across Victoria, which were renamed Lindsay's Target.
The retailer was renamed Target Australia in 1973.
Wesfarmers says the sustained decline in sales momentum will affect profitability of Kmart and Target. Pictured is Sydney's Pitt Street Mall on Monday
Comments 0
Share what you think
No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards.
