Wesfarmers says Kmart, Target hit by Omicron surge

While trading conditions improved, as restrictions eased in the December quarter, customer traffic to its stores was hit by the rising infection numbers from the Omicron variant, “particularly during the Christmas trading period,” it said.

And while the chain stores managed to avoid the global supply chain disruption by holding higher levels of inventory onshore, “high levels of COVID-related absenteeism in New South Wales and Victorian distribution centres impacted the ability to deliver stock to stores in line with customer demand”, it said.

In recent weeks retailers and supermarkets have experienced a shortage of goods as they battle to maintain adequate staffing amid the latest COVID wave.

“Australia has more than enough food and essential goods, but at the moment retailers are getting disrupted by a shortage of essential staff to process and distribute these goods,” Macquarie said, referring to recent updates from Woolworths, chicken supplier Ingham’s and clothing store City Chic.

However, according to Macquarie, the peak is expected within weeks as easing rules and peaking infections take the pressure off supply chain workers.

But for Wesfarmers, it means Kmart and Target will drag on its performance for the December half year, although it still expects to report net profit after tax (NPAT) of between $1.18 billion and $1.24 billion, in line with current consensus expectations.

The stock closed up 2.6 per cent after the announcement to a high of $55.38.

“The group’s performance for the half was supported by pleasing results in Bunnings and Wesfarmers Chemicals, Energy and Fertilisers, while results in Kmart Group and Officeworks were impacted by COVID-related disruptions and costs,” Wesfarmers said.

Combined Kmart and Target sales declined 10.3 per cent for the first half and declined 5.2 per cent on a two-year basis, although this included planned store closures as well.

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