Profits at department chains Kmart and Target have tanked, in what their owner describes as the “most disrupted period for our businesses since the onset of COVID-19”.
Kmart Group posted a 63.4 per cent decline in earnings for the last six months of 2021, about $309 million less than the same period in 2020.
Retail conglomerate Wesfarmers, which owns Kmart and Target, blamed the fall on COVID-19, saying its marquee department stores lost about a fifth of their store trading days to Delta lockdowns in NSW and Victoria.
Wesfarmers managing director Rob Scott said 34,000 trading days were affected by government COVID-19 restrictions.
“This included more than 20,000 days for which stores were completely closed to customers,” he said in a statement to investors on Thursday.
“Operating costs and stock availability were impacted by ongoing supply chain disruptions and elevated team member absenteeism.”
Wesfarmers shares fell 3.8 per cent on news of the earnings plunge.
Wesfarmers’ other retail businesses, Bunnings and Officeworks, held up better over the period, but their earnings were still down on the prior year.
Bunnings earnings fell 1.2 per cent, while Officeworks fell 18 per cent.
But the discount chains were by far the worst performing businesses.
Kmart and Target sales were 5.2 per cent below pre-pandemic levels and down 10.3 per cent on the prior year, Wesfarmers told investors.
It comes after the company warned last month that the Omicron wave was wreaking havoc on Kmart and Target, with sales down due to lower shopper confidence and staff shortages forcing some store closures.
Mr Scott said on Thursday that while stock availability issues persisted, sales had improved in recent weeks as Omicron infections have fallen from earlier peaks.
“The group has continued to incur additional costs and experience stock availability impacts as a result of ongoing global supply chain disruption,” he said.
“Elevated transport costs and constraints in domestic labour markets are expected to continue in the second half [January 1-June 31].”
Despite this, Mr Scott said he was confident Wesfarmers’ retail brands could maintain lower prices than their competitors by leveraging scale.
Wesfarmers was managing “increasing inflationary pressure”, he said.
Wesfarmers also provided an update about its purchase of Priceline owner Australian Pharmaceutical Industries on Thursday.
Mr Scott said the transaction will be finished by the end of March, after the competition watchdog gave the all-clear to the deal earlier this week.