Wesfarmers : 2017 Third Quarter Retail Sales Results

27 April 2017

Refer to Appendix Three for footnotes.

Refer to Appendix Three for footnotes.

Wesfarmers Limited today announced its retail sales results for the third quarter of the 2017 financial year.

Managing Director Richard Goyder said the sales performance of the Group's retail businesses was generally pleasing given the later timing of Easter in the 2017 financial year, with most businesses building on the strong growth achieved in the prior corresponding period.

"Coles' headline food and liquor sales increased by 1.2 per cent during the quarter, with the business investing more significantly in the customer offer.

"Bunnings Australia and New Zealand achieved total sales growth of 7.7 per cent during the quarter, building on the strong growth achieved in prior periods through the continued solid execution of its strategic agenda. In the United Kingdom and Ireland, further progress has been made on transition, separation and integration activities following the Homebase acquisition. Following the successful launch of the first Bunnings pilot store in February 2017, the second pilot store was opened in Hatfield Road, St Albans on 12 April 2017.

"Kmart's total sales increased 2.5 per cent, extending the very strong performance achieved in the prior corresponding period, with further price investments made during the period. Target continued to progress its transition to everyday low prices, recording a decline in total sales of 18.1 per cent during the quarter.

"Officeworks' strong sales growth of 9.0 per cent was driven by the sound execution of its 'every channel' strategy, with positive sales growth achieved in stores and online."

Headline food and liquor sales for the third quarter1 were $7.6 billion, up 1.2 per cent on the previous corresponding period. Food and liquor sales for the financial year to date7 increased 1.9 per cent to

$24.6 billion.

Comparable food and liquor sales increased 0.3 per cent and comparable food sales increased

0.4 per cent for the quarter1. After adjusting for the later timing of Easter in the 2017 financial year, comparable food and liquor store sales and comparable food sales for the quarter increased 0.7 per cent and 0.8 per cent, respectively. For the financial year to date7, comparable food and liquor sales increased

1.0 per cent and comparable food sales also increased 1.0 per cent.

Food and liquor price deflation was 0.5 per cent during the quarter1 and 0.8 per cent for the financial year to date7. Price deflation during the quarter was lower than recent periods due to the impact of supply-driven fresh produce inflation, which reached its highest level in over three years. Excluding fresh produce and tobacco, deflation for the quarter was 2.2 per cent. The business has now recorded 24 consecutive

quarters of price deflation.

Coles Managing Director John Durkan said the sales growth achieved reflected Coles' strategy to continue to invest in the customer offer in a period of lower growth. "On an Easter adjusted basis, our sales growth in food was broadly in line with the second quarter trend while investment in the customer offer increased during the period," Mr Durkan said.

"It is necessary that we continue to proactively invest in the customer offer throughout this period of lower growth and increased competition to ensure we maintain our market leading customer offer," Mr Durkan said. "This was evident throughout the quarter, whether that was through the addition of family essentials like our 3 star mince and Coles brand cheeses to Every Day value, or by offering our award winning hot cross buns to customers at an incredible price. This enduring customer focus will ensure Coles is positioned well for the long term," Mr Durkan said.

"The Liquor business continued to execute on its turnaround strategy in line with expectations," Mr Durkan said. "Liquor continues to see growth in both headline sales and transactions, but there still remains much opportunity for improvement as we progress our customer-led strategy."

Coles continued to improve and optimise its store network, opening six supermarkets and closing one supermarket during the quarter, resulting in a total of 796 supermarkets at the end of the quarter. Two supermarkets were renewed during the quarter.

Liquor continued to improve its store network, opening nine new stores and closing two stores during the quarter. At the end of the period, Coles had a total of 879 liquor stores and 89 hotels.

Total Coles Express sales, including fuel, for the quarter1 were $1.4 billion, a decrease of 3.0 per cent on the previous corresponding period, with the impact of lower volumes offsetting continued growth in convenience store sales. Total sales for the financial year to date7 decreased 8.8 per cent to $4.7 billion.

For the quarter1, headline fuel volumes decreased 20.7 per cent and comparable fuel volumes decreased

22.0 per cent. For the financial year to date7 headline fuel volumes decreased 13.1 per cent and comparable fuel volumes decreased 15.9 per cent. In addition to challenging market growth and the continuing impacts from competitor site openings, volumes remained in decline as Coles Express continued to respond to changes in the commercial terms of the Alliance which included an increase in Coles' wholesale fuel price during the quarter.

Headline convenience store sales increased 0.9 per cent for the quarter1 and decreased 0.8 per cent on a comparable store basis. For the financial year to date7, convenience store sales increased 4.6 per cent and increased 1.4 per cent on a comparable store basis.

Coles Express continued to expand its network during the quarter, opening five new sites and closing two sites, bringing the total network to 698 sites.

Refer to Appendix Three for footnotes.

Total sales for the quarter4 were $2.8 billion, up 7.7 per cent on the previous corresponding period. Total store sales for the quarter4 increased 7.4 per cent, while store-on-store growth was 6.0 per cent.

For the financial year to date8, total sales increased 8.1 per cent to $8.7 billion. Total store sales grew

8.1 per cent in the year to date8, while store-on-store growth was 6.3 per cent.

The results for the quarter built on the very strong performances achieved in the two prior corresponding periods in the 2016 and 2015 financial years, where total store sales grew 11.5 per cent and 11.8 per cent, respectively.

BANZ Managing Director Michael Schneider said the sales growth achieved was pleasing, particularly given the varying market conditions during the quarter.

"An ongoing focus on delivering our strategic agenda continued to provide positive outcomes," Mr Schneider said. "We continue to invest strongly to deliver a winning offer to customers".

During the quarter, one replacement warehouse and one replacement trade centre were opened. A further 17 sites were under construction at the end of March 2017.

Total sales for the quarter4 were £245 million ($400 million). On a like-for-like trading basis across the third quarter, customer participation, as measured by transactions, increased by 2.2 per cent. For the financial year to date8, total sales were £851 million ($1,429 million). Customer participation for the financial year to date increased by 6.9 per cent.

BUKI Managing Director PJ Davis said trading during the quarter was negatively affected by the continued repositioning of the kitchen and bathroom offer, while the performance across other core home improvement and garden products was pleasing.

"Our first Bunnings Warehouse pilot stores have been well received by customers, team members, and the community. The team continues to progress the strategic plan and is focused on building strong foundations," Mr Davis said.

During the quarter, the first Bunnings Warehouse pilot store was opened. A second pilot site was opened on 12 April 2017 at Hatfield Road, St Albans. There were 254 Homebase stores as at the end of

March 2017.

Refer to Appendix Three for footnotes.