From the December 2024 half-year, Target will cease to exist as an independent entity in terms of its sales reports within Wesfarmers’ public reporting.
Wesfarmers has been gradually merging Kmart and Target since 2020, with the pace accelerating in July of last year through the creation of the Kmart Group, which will consist of both chains.
Up to June 30, the end of the 2023-24 financial year, sales and earnings data were reported separately. However, from the current December first half of the 2024-25 financial year, this will change, as Wesfarmers revealed in its 2023-24 annual report.
“In light of the integration of Kmart and Target, and the introduction of the Anko (Kmart’s best-seller) general merchandise range to Target, sales growth metrics will be reported at a Kmart Group level only from the first half of the 2025 financial year onwards.”
“The integration of the Kmart and Target processes, systems, and organisational structures to achieve one operating model across the two brands progressed in line with expectations” in the year to June.
Wesfarmers said Kmart Group’s performance was a standout, delivering significant earnings growth supported by the market-leading value credentials of its Anko products, unique sourcing capabilities, and actions to reduce costs.
“At Target, the sale of Anko products performed well, and the integration of Kmart Group systems and processes progressed in line with expectations.”
Wesfarmers noted that the introduction of Anko products in Target has met expectations since its launch.
Revenue for Kmart Group increased by 4.4% to $11.107 billion for the 2024 financial year. Earnings of $958 million were up 25% from the previous year, setting a record for the business.
Kmart saw total sales growth of 6.3%, which Wesfarmers attributed to “the continued strong response by customers to the Anko product offer and Kmart’s lowest price positioning. Sales increased across all categories for the year, with units sold, transaction volumes, and customer numbers all growing compared to the prior year.”
In contrast, Target’s total sales fell by 4.5% over the year. However, the second half of the year showed relatively stronger performance in apparel and included a disrupted period of sales due to the changeover in Target’s general merchandise range to Anko.
Despite the decline, the integration appears to be successful, as Wesfarmers reported that “Target delivered positive earnings for the year and the second half.”
Earnings growth for the year reflected Kmart’s strong trading performance, including significant growth in apparel sales due to improvements in the product offer. Well-executed pricing strategies enabled the business to achieve profitable growth in share of wallet while maintaining Kmart’s lowest price positioning.
Kmart Group is now the second biggest sales generator for Wesfarmers and its second biggest profit source. However, earnings are growing much faster than elsewhere—the nearly 25% rise outshone the previous star, Bunnings, which reported a 1.8% rise.
There is an irony here—both chain names are American, and Kmart is far more successful in Australia than in the US, where it has all but vanished.
Kmart was once the discount king in the US, while Target lagged. Now, Kmart has disappeared from the US, and Target is the second biggest US retailer behind Walmart.
Kmart was brought to Australia by the former GJ Coles and Kresge Company and was sold off to Wesfarmers during the split of Coles Myer.
Kmart has flourished under Wesfarmers’ ownership, especially during the tenure of former McDonald’s executive Guy Russo, who drove its revival. Target was initially successful but faded as Kmart prospered, and the merger by Wesfarmers has been a way of slowly integrating the chain into the more successful Kmart.