This retailer is costing Wesfarmers millions

“What can we expect going forward as investors or market watchers — how much pain were you willing to put up with?” Bank of America’s David Errington asked Scott Wednesday.

Scott said he believes the company’s earnings would improve significantly in the second half of fiscal 2023, but agreed Catch’s fortunes need to turn around quickly or Wesfarmers needs to scale back its investments in the business.

“It’s not good enough, it’s unacceptable, we’re not happy with it at all. You can expect us to take very serious action to improve financial performance,” he said.

“It’s going to be a disappointing year for Catch, but it needs to improve, it needs to improve significantly in the years to come, or we just won’t invest at current levels.”

Wesfarmers says its near-term goals include reducing overhead, which includes reducing headcount as well as conducting clearance activities to get rid of excess inventory over the next few months.

The group will do this at a time when online-only retail is slowing.

Online-only furniture retailer Temple & Webster was one example of an e-commerce business that was punished by investors last week, with shares falling 25 percent after the company announced a 46 percent fall in half-year profits.

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This could make the task of turning around Catch even more difficult, analysts fear.

“We believe the turnaround will be challenging given the very strong competition Catch faces from larger global marketplaces and omnichannel retailers, and the strong shift of customers from online back to stores,” said Citi analyst Adrian Lemme in a notice to customers.

Barrenjoey raised his price target to $48 from $49 after Wesfarmers’ results last week, noting that while Catch’s mounting losses provided a strong first-half result, they were a bottom.

“We are raising our department store and healthcare guidance on better than expected results, more than offset by higher catch losses (up from $50 million to $180 million) at Officeworks and more [energy business] WESCEF is slightly down,” said consumer analyst Tom Kierath.

Shares of Wesfarmers ended the week up more than 3 percent after sharing a more positive trading outlook for discount department store Kmart and hardware giant Bunnings.

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