Wesfarmers Second-Quarter Sales Rise as Interest Rates Cut

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Wesfarmers Ltd., Australia’s second-largest retailer, posted a 4.8 percent rise in sales as the central bank cut interest rates to stimulate the economy. The shares fell the most in almost three months.

Revenue from retail businesses rose to A$15.1 billion ($15.8 billion) in the three months ended Dec. 30 on gains at its Coles supermarkets and Bunnings home improvement chain, the Perth, Australia-based company said in a statement today. That beat the A$15 billion median of seven analyst estimates compiled by Bloomberg News.

Australia’s central bank has cut rates to a half-century low in an attempt to stimulate non-mining sectors of the economy, stoking consumer confidence, which hit a 19-month high in November. Coles refurbished stores and cut prices on staples including bread and milk to win customers from first-ranked Woolworths Ltd. in a country where they share 80 percent of the market.

“Broader sales trends remain sluggish,” Citigroup Inc. analyst Craig Woolford, who rates the stock a sell, wrote in a Jan. 24 note to clients. “The stock is over-priced.”

Wesfarmers shares fell 1.8 percent to A$38.13 at the close in Sydney, its biggest drop since Nov. 1, while the S&P/ASX 200 index rose 0.2 percent. The stock has surged 26 percent in the past 12 months, compared to a 15 percent improvement in the benchmark.

The 4.8 percent rate of total sales growth in the second-quarter was the best for the period in at least two years, with revenues rising 4.6 percent during the same period of 2011 and 4.7 percent in 2010.

The company didn’t detail quarterly retail sales performance before 2010.

Sales at Coles food and liquor stores rose 5 percent in the quarter compared with the 5.2 percent median of six analyst estimates compiled by Bloomberg News.

At Coles supermarkets open at least 12 months, sales rose 3.9 percent in the quarter compared with the 4.2 percent growth expected by the median of seven analyst estimates.

While fresh produce prices fell at a slower rate than previously, food and liquor price deflation still came to 0.9 percent in the December quarter, Wesfarmers said. Australia’s consumer price inflation during the period was 2.2 percent.

Bunnings, the nation’s largest home improvement chain, posted a 6.6 percent rise in sales while Kmart increased revenue 3.8 percent, its fastest pace since at least 2010.

Australia’s business sentiment climbed by the most in more than a decade in December, according to a private survey, as traders price in a 30 percent chance the central bank will reduce rates further when it meets next week.

Woolworths reports second-quarter sales tomorrow.