Price-driven marketing pays off for Coles and Bunnings, but Target hit by sales decline

Wesfarmers marketing strategy to promote “every day low prices” across its brands has seen largely positive results in the third quarter with only Target failing to see a sales lift.

Coles, which is locked in a price war with Woolworths, reported a sales increase of 5.4 per cent to $7.1bn in the three months ending March, taking sales for the financial year to almost $23b, also up 5.4 per cent.

Prices fell one per cent during the quarter, 0.8 per cent for the year, “reflecting continued investment in lower prices”, the supermarket said.

There was also strong growth for Bunnings, where total sales for the quarter climbed 12 per cent to $2.3b in the quarter and by 11.9 per cent to $7.3b for the year.

Kmart reported a lift in sales of almost 11 per cent to $937m, falling to 5.5 per cent when adjusted for Easter which fell later in 2014.

But Target disappointed – despite selling more product – as sales fell 1.6 per cent to $663m.

“We are seeing more customers shop with us [and] we are selling more units,” managing director Stuart Machlin said. “But this volume growth is not yet enough to offset the investment we are making to deliver lower prices.”

Coles MD John Durkan said the sales lift illustrated the success of its strategy to reduce prices while his counterpart at Wesfarmers home improvement and office supplies division, John Gillam, said the brand had taken advantage of good trading conditions.

“This is a reflection of the continuing focus on our strategic agenda of delivering more customer value, better customer experiences, extending brand reach, expanding commercial and increasing merchandise innovation,” he said.

Steve Jones