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Costly COVID-19 containment steps to stay for now at Bunnings

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“I think people should be cautious about the risk of a second wave but from what we see in Australia, the state and federal government are doing the right things and are very vigilant at managing the health issues.”

Mr Scott’s warning comes as the $47 billion retailer’s Bunnings and Officeworks chains recorded bumper sales over the past five months, with both chains boasting double-digit growth as Australians loaded up on computer monitors and power drills during the coronavirus lockdown.

Sales at hardware chain Bunnings have so far surged 19.2 per cent across the second half of the financial year, more than three times the growth seen in the December half. Meanwhile, office supplies chain Officeworks’ sales soared even more, jumping 27.8 per cent for the second half compared to 11.5 per cent growth in the first.

Both Bunnings and Officeworks were direct beneficiaries of the coronavirus lockdown, as customers decked out their home offices and started new home projects during the two-month shutdown.

However, the growth was accompanied by $20 million in additional costs at Bunnings for cleaning and security measures, along with a separate $70 million hit because of trading restrictions in New Zealand, an accelerated rollout of its online platform and a write-off of old e-commerce assets.

Mr Scott said there had been fresh costs incurred across all of Wesfarmers’ businesses, which include Kmart, Target and an industrials and workwear division. However, the scale of required changes at Bunnings meant the costs were higher for the chain.

Measures such as limiting the number of shoppers allowed inside stores will continue for some time, Wesfarmers warns.

Measures such as limiting the number of shoppers allowed inside stores will continue for some time, Wesfarmers warns.Credit:Wayne Taylor

Since the onset of the outbreak, Bunnings limited customer numbers in-store, upped cleaning frequency, closed stores earlier and provided employees with masks and hand sanitiser to limit the virus spread. Following Wesfarmers’ divestment of Coles in 2018, Bunnings is now the conglomerate’s key earner, making up around 60 per cent of profits.

However, Mr Scott said he had no regrets about putting the costly measures in place so early, saying they helped give customers and employees confidence stores were safe.

“Although we have incurred additional costs, we’re very pleased to have done so because there’s still confidence within our team and customers,” he said. “We were just focused on doing the right thing by our team members and customers.”

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Mr Scott also dismissed calls to extend the JobKeeper wage subsidy scheme beyond September, instead urging governments to scrap payroll taxes and stamp duty to help the economy recover.

Wesfarmers’ recent $230 million acquisition of pure-play online retailer Catch also appears to have paid dividends for the retailer, with the division reporting a massive 68.7 per cent jump in gross transaction values as customers preferred shopping online over heading to stores.

Total e-commerce sales across all Wesfarmers divisions surged 89 per cent, generating nearly $2 billion in revenue for the company. Mr Scott said digital would be an area of focus for Wesfarmers moving forward, noting there were “further opportunities” for the company to invest in the e-commerce space.

Wesfarmers’ department stores did not fare as well, with Kmart sales up just 4.1 per cent, down on the 7.6 per cent growth in the prior period. Struggling stablemate Target’s sales improved on the first half but still remained negative, down 1.8 per cent.

Mr Scott pinned this decline on low demand for apparel during the shutdown and supply issues affecting some key categories such as homewares.

Wesfarmers shares jumped 2.3 per cent to $42.68 following the announcement but ended the day flat, up just 0.14 per cent.

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