Wesfarmers boss Rob Scott flags price increase for Bunnings, Kmart, Target items

War inflation is squeezing the owner of Bunnings, Kmart and Target but also pushing more value-conscious shoppers into its stores in pursuit of cheaper buying.

Wesfarmers, the country’s biggest non-food retailer, on Tuesday confirmed its extensive operations were being pressured by rising costs triggered by the conflict in the Middle East that are being felt across global supply chains.

Speaking publicly for the first time about the impact of the war on Wesfarmers, chief executive Rob Scott said the $80 billion conglomerate was feeling the pressure hard in transport and shipping, and building-related areas such as PVC pipes and plastics.

However, while it expects elevated fuel prices will force the group to lift some prices, Wesfarmers is again taking comfort from the historical ability of hardware business Bunnings and discount department store Kmart, in particular, to perform well in tougher economic times.

The flagship retailing businesses account for more than half of Wesfarmers’ near $50 billion in annual revenues.

“We are seeing cost pressures flow through in transportation, international container shipping, and also domestic transport, and (there are) also cost pressures particularly in relation to building products, where petrochemicals are a key input, whether it be PVC, steel or concrete,” Mr Scott told The Nightly.

But “people who have followed us for a long time understand that our businesses, like Bunnings and Kmart, tend to perform relatively well through the tougher economic times, even if some customers have less to spend”, he said.

“So while we are seeing some households spending less, we are also seeing other customers increasingly choosing our businesses because of the value they offer, and their desire to save money in the current environment.

“Those businesses are in very good shape and there are plenty of other good opportunities across our chemicals, energy and fertiliser division.”

He had earlier told a conference in Sydney that Wesfarmers would inevitably pass on some of the higher costs to customers.

“Obviously when cost prices are going up, some prices ⁠are going to have to go up,” he said.

“There will be some costs that do need to flow through, like obviously transport costs; fuel costs are having an impact on supply chains.”

Wesfarmers also announced on Tuesday it was investing $100 million in a new joint venture with contractor Built to directly help ease Australia’s housing crisis.

The partnership will make modular and precast apartment components to deliver high-rise apartment buildings cheaper and quicker.

“Australia urgently needs more housing, and the Built Living joint venture is well-positioned to address that need using internationally proven construction models, to deliver high-quality properties,” Mr Scott said.

The joint venture factory will be built in north-west Perth on land provided by the WA Government, but the partners want to roll out the venture nationally.