1
00:00:05,640 --> 00:00:08,760
Speaker 1: Welcome to the Fear and Greed Business Interview. I'm Sean Almam.

2
00:00:08,840 --> 00:00:11,800
Speaker 1: West Farmers is one of the most interesting companies in

3
00:00:11,840 --> 00:00:15,360
Speaker 1: the country, one of the few remaining conglomerates, best known

4
00:00:15,400 --> 00:00:18,720
Speaker 1: though for its retail brands Kmart and Bunnings. Last week,

5
00:00:18,720 --> 00:00:22,000
Speaker 1: West Farmers announced a jump in revenue and sales, largely

6
00:00:22,079 --> 00:00:24,960
Speaker 1: thanks to those two retailers. Net profit came in at

7
00:00:24,960 --> 00:00:27,720
Speaker 1: one point five billion dollars, much higher than analysts expected,

8
00:00:27,760 --> 00:00:31,520
Speaker 1: with an increased dividend. Also, today's interview with Rob Scott,

9
00:00:31,640 --> 00:00:34,599
Speaker 1: Managing Director of West Farmers, delves into all of it,

10
00:00:34,720 --> 00:00:38,479
Speaker 1: from the extraordinary growth of Kmart's Ancho brand and Bunnings

11
00:00:38,520 --> 00:00:41,480
Speaker 1: pushing into pet care, right through to what went wrong

12
00:00:41,520 --> 00:00:44,839
Speaker 1: with online retailer catch and what the arrival of Chemist

13
00:00:44,840 --> 00:00:48,680
Speaker 1: Warehouse on the ASX means for West Farmers price line pharmacies.

14
00:00:49,080 --> 00:00:52,000
Speaker 1: This reporting season, we're partnering with the team at osbiz

15
00:00:52,040 --> 00:00:55,640
Speaker 1: to bring you interviews with some of Australia's top business leaders.

16
00:00:55,960 --> 00:00:58,480
Speaker 1: Oz biz is the country's leading provider of live and

17
00:00:58,520 --> 00:01:01,760
Speaker 1: on demand video of the latest news in Australian business, markets,

18
00:01:01,800 --> 00:01:05,839
Speaker 1: economy and startups. Sign up for free at Osby's dot

19
00:01:05,880 --> 00:01:11,120
Speaker 1: com Au. Rob Scott Weishama's MD, speak with Juliet Sali.

20
00:01:16,640 --> 00:01:18,720
Speaker 2: Rob, great to have you with us. I mean, first off,

21
00:01:18,760 --> 00:01:21,200
Speaker 2: I guess in your words some of the highlights from

22
00:01:21,200 --> 00:01:23,280
Speaker 2: the healf well, I'd.

23
00:01:23,120 --> 00:01:27,160
Speaker 3: Say the highlight for us was recognizing that last year

24
00:01:27,280 --> 00:01:30,319
Speaker 3: was a really difficult year economically in Australia, especially for

25
00:01:30,400 --> 00:01:34,559
Speaker 3: many households and consumers. To be able to deliver growth

26
00:01:34,600 --> 00:01:37,840
Speaker 3: in revenues, in profit and be able to increase our

27
00:01:37,840 --> 00:01:40,399
Speaker 3: dividends in that environment, it's a real credit to the

28
00:01:40,440 --> 00:01:44,679
Speaker 3: team and that was really possible through the strong performances

29
00:01:44,760 --> 00:01:45,880
Speaker 3: of our larger business.

30
00:01:46,080 --> 00:01:51,000
Speaker 4: Bunnings came out in our Chemictenergy first business and we

31
00:01:51,120 --> 00:01:54,440
Speaker 4: really had to go above and beyond around productivity initiatives

32
00:01:54,440 --> 00:01:58,160
Speaker 4: in order to manage those cost pressures to keep our

33
00:01:58,240 --> 00:02:01,400
Speaker 4: prices low at a time when consumers were really.

34
00:02:01,240 --> 00:02:02,240
Speaker 3: Looking a value.

35
00:02:03,040 --> 00:02:05,600
Speaker 2: You mentioned though, that you don't think that the rate

36
00:02:05,680 --> 00:02:08,000
Speaker 2: cut that this we got this week is enough to

37
00:02:08,080 --> 00:02:11,480
Speaker 2: really entice shoppers, and I've flagged that to an analyst

38
00:02:11,560 --> 00:02:14,000
Speaker 2: earlier who said, look, if West Farmers is worried, all

39
00:02:14,040 --> 00:02:16,200
Speaker 2: retailers should be worried. What do you see in terms

40
00:02:16,240 --> 00:02:21,000
Speaker 2: of I guess the outlook and consumers parting with their cash.

41
00:02:21,080 --> 00:02:23,359
Speaker 3: Well, look a couple of things. Firstly, if you look

42
00:02:23,400 --> 00:02:26,480
Speaker 3: around the world at what's happened when different countries have

43
00:02:26,600 --> 00:02:31,000
Speaker 3: gone through a easing cycle, it often takes more than

44
00:02:31,040 --> 00:02:34,600
Speaker 3: just one twenty five based point cut. And remembering as

45
00:02:34,680 --> 00:02:37,240
Speaker 3: well that interest rates are not the only thing that

46
00:02:37,240 --> 00:02:40,800
Speaker 3: that is the economy. Inflation is caused by a range

47
00:02:40,800 --> 00:02:43,480
Speaker 3: of other factors as well, and in Australia we are

48
00:02:43,520 --> 00:02:49,520
Speaker 3: facing some cost pressures on energy. Building costs are still

49
00:02:49,840 --> 00:02:54,040
Speaker 3: under pressure. Supply chain costs are some of those examples.

50
00:02:54,080 --> 00:02:56,840
Speaker 3: So I think the Reserve Bank governor said it very

51
00:02:56,880 --> 00:02:59,160
Speaker 3: well the other day where she said there was a

52
00:02:59,240 --> 00:03:03,200
Speaker 3: case to lower interest rates, but she was very mindful

53
00:03:03,240 --> 00:03:05,680
Speaker 3: of the inflationary pressures that still exist.

54
00:03:06,600 --> 00:03:11,000
Speaker 2: How much is the weak Australian dollar hurting west farmers

55
00:03:11,280 --> 00:03:14,760
Speaker 2: and is it likely to cause higher prices at some

56
00:03:14,840 --> 00:03:18,560
Speaker 2: of your areas the likes of Ancho Kmart Bunning's office

57
00:03:18,600 --> 00:03:20,200
Speaker 2: works well.

58
00:03:20,240 --> 00:03:24,240
Speaker 3: We called out the lower Australian dollar as having potentially

59
00:03:24,280 --> 00:03:27,400
Speaker 3: a bit of an inflationary impact on many of the

60
00:03:27,440 --> 00:03:31,520
Speaker 3: important products that Australian households and businesses buy. But that

61
00:03:31,680 --> 00:03:35,440
Speaker 3: is unlikely to flow through until later this year because

62
00:03:35,480 --> 00:03:38,920
Speaker 3: it takes time for it's really the products that that

63
00:03:39,000 --> 00:03:41,880
Speaker 3: companies are purchasing today that consumers will be buying the

64
00:03:41,880 --> 00:03:44,840
Speaker 3: next six months that will flow through in higher prices.

65
00:03:44,880 --> 00:03:48,880
Speaker 3: Now in West Farmers, we've demonstrated through Kmart Bunning's office

66
00:03:48,920 --> 00:03:51,880
Speaker 3: works that we can find ways to try and mitigate

67
00:03:51,960 --> 00:03:54,200
Speaker 3: some of these cost pressure because what we will be

68
00:03:54,280 --> 00:03:57,240
Speaker 3: doing is doing everything we can to keep our prices

69
00:03:57,280 --> 00:04:00,880
Speaker 3: low because of our everyday low price strad But I

70
00:04:00,880 --> 00:04:03,320
Speaker 3: think we do need to be mindful that the lower

71
00:04:03,360 --> 00:04:06,120
Speaker 3: Australian dollar, although it's good for a lot of our exports,

72
00:04:07,320 --> 00:04:09,880
Speaker 3: will potentially create some inflationary pressure.

73
00:04:10,800 --> 00:04:13,680
Speaker 2: So we touched there on Camart on Ancho. What's the

74
00:04:13,760 --> 00:04:16,479
Speaker 2: trajectory for Anco? How big do you see this part

75
00:04:16,520 --> 00:04:17,680
Speaker 2: of your business becoming?

76
00:04:18,480 --> 00:04:21,520
Speaker 3: Well, First and foremost, we are folks. We're continuing to

77
00:04:21,560 --> 00:04:25,040
Speaker 3: focus on bringing more amazing Ancho products to life in

78
00:04:25,080 --> 00:04:29,640
Speaker 3: Australia and New Zealand. They are our core markets and

79
00:04:29,720 --> 00:04:33,920
Speaker 3: we want Australians New Zealanders to benefit from the amazing

80
00:04:34,000 --> 00:04:37,920
Speaker 3: value the product innovation that comes from Anco. But we

81
00:04:37,960 --> 00:04:40,000
Speaker 3: are starting to look at ways in which we can

82
00:04:40,160 --> 00:04:44,200
Speaker 3: export some of that internationally, so we've recently opened a

83
00:04:44,279 --> 00:04:47,200
Speaker 3: trial store in the Philippines in partnership with the local groups.

84
00:04:47,960 --> 00:04:53,320
Speaker 3: We have partnerships with Walmart Canada, with Mattel Fisher Price,

85
00:04:54,160 --> 00:04:58,360
Speaker 3: with car four in France, and also issuing some other opportunities.

86
00:04:58,400 --> 00:05:03,200
Speaker 3: So we would like to see some growth internationally leveraging

87
00:05:03,200 --> 00:05:06,159
Speaker 3: that ancho product and capability, but that will be a

88
00:05:06,200 --> 00:05:07,839
Speaker 3: longer term growth opportunity.

89
00:05:08,320 --> 00:05:11,120
Speaker 2: Rob what went wrong with Cats?

90
00:05:12,480 --> 00:05:15,680
Speaker 3: Well, look, Catch was one of a number of investments

91
00:05:15,720 --> 00:05:18,839
Speaker 3: we've made as we've tried to embark on our own

92
00:05:18,960 --> 00:05:23,960
Speaker 3: digital disruption and digital transformation. In addition to Catch, we've

93
00:05:24,040 --> 00:05:26,920
Speaker 3: invested over two billion dollars in the last five years

94
00:05:26,920 --> 00:05:31,080
Speaker 3: on improving our data and digital capabilities, and whilst overwhelmingly

95
00:05:31,160 --> 00:05:34,640
Speaker 3: that investment has been successful and is helping to deliver

96
00:05:34,800 --> 00:05:39,039
Speaker 3: the strong results we're delivering today, the world has changed

97
00:05:39,040 --> 00:05:43,000
Speaker 3: a lot since we bought Catch. The competitive environment has shifted,

98
00:05:43,839 --> 00:05:46,600
Speaker 3: and it was clear that having a pure play marketplace

99
00:05:46,800 --> 00:05:50,800
Speaker 3: was probably not the ideal structure for our businesses. So

100
00:05:51,480 --> 00:05:53,000
Speaker 3: we have lost a bit of money, a bit more

101
00:05:53,040 --> 00:05:55,279
Speaker 3: money than we would have liked, but we have built

102
00:05:55,279 --> 00:05:58,640
Speaker 3: some very valuable capabilities that will continue to be utilized

103
00:05:58,640 --> 00:06:03,120
Speaker 3: by our groups, such as the next day delivery fulfillment

104
00:06:03,160 --> 00:06:06,480
Speaker 3: centers we will be moving over to came Out and

105
00:06:06,839 --> 00:06:09,040
Speaker 3: came Out and target in the next few months.

106
00:06:09,560 --> 00:06:12,600
Speaker 2: And speaking of online marketplace, I mean you're really ramping

107
00:06:12,600 --> 00:06:15,240
Speaker 2: that up with the likes of Bunnings. Tell us what

108
00:06:15,279 --> 00:06:18,000
Speaker 2: you hope to achieve here and whether or not Bunnings

109
00:06:18,080 --> 00:06:21,719
Speaker 2: might have met already some peak growth aspirations.

110
00:06:22,440 --> 00:06:25,640
Speaker 3: Yes, well, I think the example within Bunnings and the

111
00:06:25,760 --> 00:06:28,600
Speaker 3: marketplace and Bunnings is a great example of just how

112
00:06:28,680 --> 00:06:32,040
Speaker 3: the retail world's changed. When we bought Catch, we thought

113
00:06:32,080 --> 00:06:37,680
Speaker 3: that having a pure play, broad based marketplace could be

114
00:06:37,880 --> 00:06:41,800
Speaker 3: a very strategically powerful opportunity for us. But what we're

115
00:06:41,839 --> 00:06:43,880
Speaker 3: now finding is that we have some of the most

116
00:06:43,960 --> 00:06:48,800
Speaker 3: trusted and visited e commerce platforms in the country within

117
00:06:48,880 --> 00:06:52,279
Speaker 3: our existing retail brands, so leveraging them as we are

118
00:06:52,279 --> 00:06:55,039
Speaker 3: in Bunnings is proving to be very very good for

119
00:06:55,120 --> 00:06:58,960
Speaker 3: customers and more financially attractive for us. But we still

120
00:06:59,000 --> 00:07:01,400
Speaker 3: see a lot of growth head in Bunnings. We're seeing

121
00:07:01,560 --> 00:07:04,760
Speaker 3: new ranges coming into Bunnings, We're seeing for the innovation,

122
00:07:05,400 --> 00:07:08,800
Speaker 3: we're seeing very strong growth through the digital channels, and

123
00:07:08,839 --> 00:07:10,800
Speaker 3: the other thing that we are hopeful for that we

124
00:07:10,880 --> 00:07:14,280
Speaker 3: will start to see a pick up in residential construction

125
00:07:14,360 --> 00:07:17,440
Speaker 3: and development over the next year because over the last

126
00:07:17,920 --> 00:07:20,840
Speaker 3: year or two that market has been really flat for Bunny,

127
00:07:21,000 --> 00:07:24,040
Speaker 3: so there is a bit of upside should that market

128
00:07:24,080 --> 00:07:24,720
Speaker 3: start to turn.

129
00:07:25,480 --> 00:07:27,680
Speaker 2: And one of the ways that you are diversifying as

130
00:07:27,680 --> 00:07:29,880
Speaker 2: well as in pet care, do you think that could

131
00:07:29,880 --> 00:07:31,960
Speaker 2: be a potential category killer here?

132
00:07:32,720 --> 00:07:37,840
Speaker 3: Well, a number of our businesses offer pet accessories products. Obviously,

133
00:07:37,920 --> 00:07:41,160
Speaker 3: Bunnings is selling a range of products and because we're

134
00:07:41,160 --> 00:07:46,120
Speaker 3: offering a very unique offer with fantastic value, different pack sizes,

135
00:07:46,440 --> 00:07:50,440
Speaker 3: more bulk solutions, customers seem to be loving it, so

136
00:07:50,480 --> 00:07:55,400
Speaker 3: we're pleased with that. Camart also is a major retailer

137
00:07:55,440 --> 00:07:59,040
Speaker 3: of pet accessories, has an amazing offer and in fact

138
00:07:59,040 --> 00:08:02,600
Speaker 3: it's those products that we're actually selling in France through

139
00:08:03,080 --> 00:08:05,960
Speaker 3: some of the car for hyper markets. So it's a

140
00:08:06,000 --> 00:08:09,280
Speaker 3: growing category and we feel that there's a role for

141
00:08:09,360 --> 00:08:12,360
Speaker 3: some of our brands to play in that category by

142
00:08:12,400 --> 00:08:14,200
Speaker 3: delivering great value and great products.

143
00:08:14,520 --> 00:08:17,640
Speaker 2: Rob let's talk about competition. You own the price line pharmacies.

144
00:08:17,680 --> 00:08:20,720
Speaker 2: What does a tie up between Sigma and chemist Warehouse

145
00:08:20,800 --> 00:08:21,320
Speaker 2: mean for you.

146
00:08:22,240 --> 00:08:25,880
Speaker 3: Well, probably the main impact of that is that it

147
00:08:26,040 --> 00:08:29,400
Speaker 3: really shines a light on the pharmacy sector from a

148
00:08:29,480 --> 00:08:33,160
Speaker 3: capital markets Quite many of these businesses flew a bit

149
00:08:33,240 --> 00:08:36,040
Speaker 3: under the radar. Certainly Chemist's Warehouse did for many years

150
00:08:36,160 --> 00:08:40,240
Speaker 3: under private ownership, and certainly there's a lot more focus

151
00:08:40,280 --> 00:08:44,200
Speaker 3: on the opportunities and the competitiveness of this sector. Obviously,

152
00:08:44,280 --> 00:08:47,760
Speaker 3: Chemists Warehouse is a very formidable retailer, you know, and

153
00:08:47,760 --> 00:08:52,920
Speaker 3: I would say that pharmacis generally are phenomenal healthcare practitioners,

154
00:08:53,440 --> 00:08:58,160
Speaker 3: but generally not very good retailers. So the fantastic opportunity

155
00:08:58,160 --> 00:09:03,199
Speaker 3: that we see in Priceline to support our pharmacist franchisees

156
00:09:03,600 --> 00:09:07,440
Speaker 3: to really deliver a fantastic retail offer and a more

157
00:09:07,520 --> 00:09:13,400
Speaker 3: integrated healthcare service solution to really differentiate the Priceline brand.

158
00:09:13,559 --> 00:09:16,120
Speaker 3: And we've had some really good traction there. The sales

159
00:09:16,160 --> 00:09:19,520
Speaker 3: growth has been really encouraging. We're investing heavily, and that

160
00:09:19,679 --> 00:09:23,079
Speaker 3: high level of investment we're making is holding back our

161
00:09:23,120 --> 00:09:25,400
Speaker 3: earnings a bit at the moment, but we are confident

162
00:09:25,400 --> 00:09:29,320
Speaker 3: that we'll see an improvement in that earning trajectory as

163
00:09:29,320 --> 00:09:32,160
Speaker 3: we continue to win more customers into the priceline business.

164
00:09:32,720 --> 00:09:35,920
Speaker 2: So a solid result and most analysts have said so,

165
00:09:36,160 --> 00:09:39,440
Speaker 2: but a lot of concern that you're overvalued your share price.

166
00:09:39,480 --> 00:09:41,280
Speaker 2: And I know you can't control the market here, but

167
00:09:41,400 --> 00:09:45,760
Speaker 2: I heard one analyst say, great company, great management, very overvalued.

168
00:09:45,840 --> 00:09:47,920
Speaker 2: City has come through with a CELL rating and they

169
00:09:47,920 --> 00:09:50,280
Speaker 2: have a price target of fifty nine dollars, suggesting that

170
00:09:50,320 --> 00:09:53,160
Speaker 2: your share price could full twenty four percent. What do

171
00:09:53,240 --> 00:09:56,000
Speaker 2: you say to analysts who say investors should be selling

172
00:09:56,120 --> 00:09:58,040
Speaker 2: West Farmers.

173
00:09:58,160 --> 00:10:02,760
Speaker 3: Well, look, I when you look at the West Farmer's portfolio,

174
00:10:02,880 --> 00:10:05,520
Speaker 3: I think we have some of the most amazing businesses,

175
00:10:05,559 --> 00:10:08,240
Speaker 3: not just in Australia but in the world. Businesses like

176
00:10:08,440 --> 00:10:12,719
Speaker 3: Bunnings and kmart, our chemicals, energy and fertilizers business are

177
00:10:12,720 --> 00:10:16,160
Speaker 3: truly world class and they deserve to be valued well.

178
00:10:16,559 --> 00:10:19,320
Speaker 3: I think we've also demonstrated that we have a very

179
00:10:19,400 --> 00:10:24,080
Speaker 3: unique mix of resilience within our portfolio, combined with numerous

180
00:10:24,080 --> 00:10:27,200
Speaker 3: growth platforms. If I look around the world and I

181
00:10:27,200 --> 00:10:29,840
Speaker 3: look at businesses like Bomart, I would say that we're

182
00:10:30,000 --> 00:10:32,839
Speaker 3: under value given that they are trading in as significant

183
00:10:32,880 --> 00:10:36,199
Speaker 3: multiple premium to ours. But look at the end of

184
00:10:36,240 --> 00:10:39,040
Speaker 3: the day. We don't get too too fast about what

185
00:10:39,160 --> 00:10:41,280
Speaker 3: the share prices do today. We just want to keep

186
00:10:41,320 --> 00:10:45,079
Speaker 3: delivering on our strategy, delivering long term value for our shareholders,

187
00:10:45,080 --> 00:10:46,959
Speaker 3: and if we keep doing that then I think the

188
00:10:47,040 --> 00:10:48,319
Speaker 3: value will take care of itself.

189
00:10:48,920 --> 00:10:51,080
Speaker 2: And Rob just a word as well in an election

190
00:10:51,240 --> 00:10:54,360
Speaker 2: year on how you're seeing the overall environment, and I

191
00:10:54,360 --> 00:10:57,199
Speaker 2: guess in terms of workers too, given that we had

192
00:10:57,240 --> 00:11:00,520
Speaker 2: jobs at data really just showing how tight the labor

193
00:11:00,559 --> 00:11:01,040
Speaker 2: market is.

194
00:11:02,080 --> 00:11:05,640
Speaker 3: Well, you're right. I think it's a great thing is

195
00:11:05,679 --> 00:11:08,719
Speaker 3: that there is pretty close to full employment in Australia.

196
00:11:08,960 --> 00:11:12,480
Speaker 3: That is a great thing. But there are some areas

197
00:11:12,520 --> 00:11:15,760
Speaker 3: of real tightness within the labor market. We're still seeing

198
00:11:15,800 --> 00:11:20,240
Speaker 3: that in some of the trades, areas in construction. They

199
00:11:20,280 --> 00:11:22,640
Speaker 3: would probably be some of the areas I would call out,

200
00:11:23,760 --> 00:11:25,720
Speaker 3: So I think we need to be very mindful of that.

201
00:11:26,000 --> 00:11:31,240
Speaker 3: It's going to be those supply constraints, those skill shortages

202
00:11:31,320 --> 00:11:34,000
Speaker 3: that will hold Australia back from a lot of the

203
00:11:34,040 --> 00:11:37,960
Speaker 3: investment and progress and productivity work that we need to

204
00:11:38,000 --> 00:11:40,200
Speaker 3: get on with. So we need to be mindful of

205
00:11:40,240 --> 00:11:46,120
Speaker 3: that across our business. What we're demonstrating is that as

206
00:11:46,160 --> 00:11:50,080
Speaker 3: our businesses become more successful, more profitable, our team members

207
00:11:50,080 --> 00:11:54,360
Speaker 3: benefit meant over fifty thousand team members in West Farmers

208
00:11:54,400 --> 00:11:57,880
Speaker 3: also have West Farmers shares. So when West Farmers delivers

209
00:11:57,880 --> 00:12:00,400
Speaker 3: good results, our team members and our share hold is

210
00:12:00,440 --> 00:12:04,599
Speaker 3: both benefit and will continue to focus on that you know,

211
00:12:04,760 --> 00:12:14,840
Speaker 3: win win relationship between West Farmers and our team.

212
00:12:14,840 --> 00:12:17,600
Speaker 1: That was Rob Scott, Managing Director of West Farmers, speaking

213
00:12:17,600 --> 00:12:21,079
Speaker 1: with Juliet Sally on Osby's, Australia's leading provider of live

214
00:12:21,120 --> 00:12:23,760
Speaker 1: and on demand video of the latest news in Australian

215
00:12:23,800 --> 00:12:26,960
Speaker 1: business markets, economy and startups. Sign up at Osby's dot

216
00:12:27,000 --> 00:12:29,720
Speaker 1: com dot au. It's free. This is the Fear and

217
00:12:29,760 --> 00:12:32,000
Speaker 1: Greed Daily Interview. Join us every morning for the full

218
00:12:32,040 --> 00:12:35,000
Speaker 1: episode of Fear and Greed daily business news for people

219
00:12:35,000 --> 00:12:38,040
Speaker 1: who make their own decisions. I'm seanae Elma. I'm enjoying

220
00:12:38,040 --> 00:12:39,800
Speaker 1: your day.