Due to the implementation of COVID-19 restrictions, which affected trading days, the Bunnings lost about 34,000 sales days during the half.
Despite the disappointing results, Wesfarmers boss Rob Scott was still pleased with the company’s performance.
The rise in commodity prices affected the profitability of the retail businesses, but this didn’t stop the Wesfarmers from growing its chemicals, energy, and fertilisers division.
Scott noted that without the restrictions imposed by COVID-19, he would have expected the company’s performance to be worse.
He noted that Australia’s economy is starting to show signs of recovery, and the low unemployment rate will accelerate the recovery.The company’s stores are seeing a decrease in isolation due to the implementation of COVID-19.
The opening of Australia’s borders should help lower the cost of living, but Wesfarmers noted that volatility could still occur during the 2022 financial year.
In the near term, Scott noted that the company is preparing for higher costs due to the changes in the psychology of consumers.
The company’s customers will start focusing on price as they try to manage their household budgets.
It has been widely speculated that companies can pass on increasing costs to their consumers, but Scott argued that this approach is the wrong way to look at the issue.
When prices rise, companies often try to pass on more to their customers. Scott noted that this can be very costly for businesses.
In times of low prices, Wesfarmers wants to be there to help its customers. The company’s scale and merchandising capabilities allow it to manage its costs efficiently.
Although he acknowledged that there’s a chance that the rise in commodity prices will push down EBIT margins, Scott still believes that it will result in higher overall profit.
Wesfarmers’ goal is to be more price competitive in the future, which will help grow its sales.
The company’s goal is to keep prices low over the long term, and this will allow it to maintain market share gains.
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