Online innovation drives Target internet sales

Wesfarmers has said that innovation in Target's online business has led to a 40 percent increase in its retail subsidiary's internet sales for the six months ending December 2014.
Written by Leon Spencer, Contributor

Australian retail giant Wesfarmers has seen the online sales of one of its most recognisable brands, Target, surge by 40 percent in the six months ending December 2014, despite the subsidiary's overall revenue declining over the period.

The Perth-based conglomerate released its six-month earnings on the Australian Securities Exchange on Thursday, revealing an 8.3 percent increase in group net profit for the period to AU$1.38 billion, driven by growth in Coles, Bunnings, Kmart, and Officeworks.

However, Target saw its revenue decline by 1.5 percent to AU$1.9 billion for the first half of FY15. But the department store chain saw much of its sales volume shift to the internet, with the company recording a 40 percent increase in online sales compared to the same period the prior year.

"Target's earnings performance was impacted by a challenging September quarter, where there was a need for high levels of winter clearance activity," said Wesfarmer's managing director Richard Goyder. "Sales performance improved during the second quarter, and earnings increased as the implementation of Target's transformation plan gathered pace."

However, the internet sales surge that Target received was attributed by Wesfarmers to new innovation in Target's online business. The retailer relaunched its online store in late 2013, at the same time that fellow Wesfarmers subsidiary Coles launched its own enhanced website.

While Wesfarmers' latest financial results do not pin down the group's total online sales revenue, for the financial year ending June 2014, the company's online sales revenue hit AU$1.1 billion, with its largest brand, Coles, doubling its new online customer tally.

For the first half of this financial year, it was Officeworks' turn to showcase the strength of its digital presence, with a growing proportion of the subsidiary's revenue coming from online sales.

Wesfarmers told shareholders that "recent improvements to Officeworks' online platform supported an enhanced customer experience", and annualised sales through the online channel exceeded AU$200 million at the end of the half. Officeworks' total revenue for the period was AU$802 million.

Overall, Wesfarmers reported operating cash flows of AU$2.28 billion, about AU$524 million -- 29.8 percent -- over the previous year's figure, with a cash realisation ratio of 116.6 percent recorded.

Group revenue came to AU$31.97 billion for the half, up 4 percent compared to AU$31.85 billion for the same period the prior year.

Meanwhile, earnings before interest, tax, depreciation, and amortisation (EBITDA) for the half was AU$2.66 billion, down from the previous year's result of AU$2.71 billion.

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