Mr Scott said trading at other retail divisions was generally in line with management expectations.
The negative Kmart trading update follows profit warnings from Kathmandu and Costa Group and comes amid fears Christmas trading was underwhelming as online promotions in November pulled sales from December, forcing retailers to discount more heavily to achieve budgets.
In a report on Monday, Morgan Stanley analysts said channel checks indicated Christmas trading for non-food retailers was soft and retail foot traffic as measured by ShopperTrak decelerated badly during December.
“This is partly explainable by consumers browsing online then transacting instore, increasing conversion, but still looks soft,” Morgan Stanley said.
According to a Deutsche Bank report last week, several retailers had described recent trading as the “worst Christmas in a number of years”.
“Traffic and sales were generally soft but margins were a bigger issue, particularly for specialty apparel & accessory retailers,” said Deutsche Bank analyst Michael Simotas.
One-off gains
Wesfarmers expects to book at least $3.17 billion in one-off gains in the December-half, including $2.1 billion to $2.3 billion on the demerger of Coles, $670 million to $680 million from the sale of its stake in the Bengalla coal mine, $265 million to $275 million from the sale of Kmart Tyre & Auto, and $US98 million ($A138 million) on the sale of its stake in Quadrant Energy.
These gains will be partly offset by a $130 million to $150 million provision relating to supply chain modernisation in Coles.
Coles plans to spend more than $700 million over the next five years building two new automated distribution centres to replace five existing warehouses in an attempt to secure a step-change in costs and catch up with Woolworths. Coles revealed last October it would book provisions of between $130 million and $150 million in 2019 to cover the cost of closing the warehouses, including job losses and exiting leases.
Wesfarmers has retained a 15 per cent stake in Coles following the demerger.
Following the demerger of Coles and non-core asset sales, Wesfarmers’ net debt has fallen to just $0.3 billion from $3.6 billion in June 2018.
More to come.
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