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Kmart’s sales slump after ditching this outdated product

Kmart store at Innaloo, Perth. Tony Ashby/Bloomberg via Getty

Kmart has posted its sales results for the first half of the 2018 financial year and its decision to remove one product from its shelves has hit harder than expected.

In a release to the ASX, Kmart parent Wesfarmers said its 0.6 per cent comparable sales decline was largely the result of its decision to remove the “low margin DVD category” from shelves.

The product category had previously accounted for about one per cent of sales.

However weaker sales across clothing and particularly womenswear also bit the retail giant.

Wesfarmers predicts it will post earnings before interest and tax of between $385 million and $400 million for its department stores on 21 February.

It made a $415 million profit over the same period last year.

‘Stupid’ decision to remove DVDs

Kmart’s decisions to remove DVDs from shelves in June last year was slammed by customers who described the move as “stupid” on Facebook.

However as Australia Retailers Association executive director Russell Zimmermann explained to Yahoo News, “You have to maximise that shelf space.”

“You go back many years and stores like David Jones and Myer used to stock school uniforms. You can no longer buy those products because people move on, it’s nothing unusual.”

“Kmart is doing it as a commercial decision and it absolutely has a right to do it and should do it. People can still buy those products from other places.”

Speaking at the time, a Kmart spokesperson said the decision to remove the products was to make more space for “creative and activity-based kids products”.

“All of our businesses continue to deliver a compelling offer to their customers and Wesfarmers enter the new calendar year with a strong balance sheet and operating businesses well positioned for the future,” Wesfarmers managing director Rob Scott said.

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