Wesfarmers’ problem child Target will likely be the focus of attention when the Perth-based conglomerate unveils its quarterly sales results.
While Coles and Bunnings are the largest assets in Wesfarmers’ portfolio, analysts say the group is under pressure to address increasing speculation about the future of its discount department stores in the wake of an accounting scandal.
Wesfarmers will update the market on its March quarter sales on Thursday.
Target has been grappling with years of declining sales, while stablemates Kmart, Coles and Bunnings perform strongly with positive like-for-like growth.
Bell Direct equities analyst Julia Lee said the market expects Target to continue to struggle.
“Kmart and Target are very much in focus with a lot of talk about the Target brand disappearing,” Ms Lee said.
“Any commentary about Target’s future will be keenly watched.”
Market analyst Ben Le Brun of optionsXpress said Target has been the problem child for some time and the group was under pressure to turn it around.
“Wesfarmers is managing well in a tough retail environment with the exception of Target and that’s probably where the spotlight will be,” he said.
“There has been talk of merging Target and Kmart because they are so similar.”
Analysts expect Coles and Bunnings to continue to report same store sales growth.
However, Coles’ growth is expected to continue to slow amid an intense price war with Woolworths and German discounter Aldi.
The major supermarkets have been investing heavily in reducing its food prices as Aldi aggressively expands beyond Australia’s eastern states.
Investment bank Morgan Stanley has said Aldi could hit $15 billion in sales or 10 per cent of the Australian grocery market by 2020.
As for Bunnings, analysts will look out for whether the fire sale at Woolworths’ soon-to-expire Masters stores has hurt short-term sales.
Wesfarmers may also update the market on Bunnings’ expansion into the UK following its takeover of British DIY chain Homebase earlier this year.