Kmart and Target face stock shortages and slashed trading hours at some stores as surging Omicron cases threaten their huge workforces.
In a trading warning on Monday, retail giant Wesfarmers said sales at the discount retailers plunged in the last six months of 2021, with the rapid pre-Christmas rise in COVID-19 spoiling hopes of a strong holiday trade.
Making things worse, customers continued to avoid the shops in the first two weeks of January, the retailer said, while the sheer number of staff unable to work due to virus infections or because they were close contacts had hit supply chains.
This had “impacted” stock availability and forced some stores to cut trading hours, the Kmart and Target owner said in a statement.
“These issues are expected to persist while COVID-19 cases and the number of team members requiring isolation remain elevated,” it said.
Wesfarmers didn’t reveal what products were in short supply, or which Kmart and Target stores were operating with reduced trading hours.
But the warnings came after Woolworths and fast food chains KFC and McDonald’s said they faced similar staffing issues last week.
On the back of these issues, Wesfarmers warned second-half earnings for Kmart Group – including Target and Catch.com.au – will be less than half the prior year, with sales down 10.3 per cent in the past six months.
Sales for the six months to December 31 were also 5.2 per cent lower than pre-pandemic (2019), with trade impacted by lockdowns, Omicron and the closure of 62 stores under a plan to reduce Target’s footprint.
“Customer traffic to stores was impacted by rising community transmission of COVID-19 in some states, particularly during the Christmas trading period,” Wesfarmers said on Monday.
“High levels of COVID absenteeism in NSW and Victoria impacted the ability to deliver stock to stores in line with consumer demand.”
Higher costs also weighed on Kmart Group’s bottom line, while online retailer Catch Group is also expecting a $43 million-$45 million loss on the back of investments in its core business during the trading period.
Wesfarmers now expects to post earnings of $170 million-$180 million for Kmart Group for the second half of 2021, compared to $487 million for the same period in 2020.