Wesfarmers share price drops on Catch news

The Wesfarmers Ltd (ASX: WES) share price is currently in the red amid news that Catch, one of its businesses, is cutting jobs.

According to reporting by The Australian, the e-commerce player is going through a period of redundancies because the operating losses are worsening with consumers spending less online.

Catch is an online retailer of a wide variety of different products including clothes, beauty products, pet products, food and drink, home items such as furniture and appliances, sports gear and electronics.

During 2020 and 2021, businesses that sold things saw a big increase in e-commerce demand. Not only were many physical shops shut, but consumers also had more money to spend, with government stimulus and limited other options for discretionary spending.

What’s going on?

The Australian reported on comments by a Catch spokesman:

Like many eCommerce brands, Catch has made the difficult decision to reduce its workforce as the business adjusts to changes in online demand that has occurred following the Covid period. We want to be as efficient as possible to drive value for our customers.

Approximately 100 team members in Australia are impacted, with redeployment where possible across the group a key focus. Functions impacted include marketing, product and technology and finance.

Treating people with respect is our number one priority and we are providing outplacement support to impacted employees.

According to the newspaper, the job losses represent around 30% of the workforce.

Latest update that could influence the Wesfarmers share price

We’ll soon hear from Wesfarmers with its FY23 half-year result. However, the company said at its annual general meeting (AGM) that sales for the Catch marketplace had “declined through the year-to-date, as online demand generally has adjusted from very high levels recorded during periods of lockdown.”

Catch’s new CEO, Brendan Sweeney, recently joined the group and was expected to focus on plans to improve the customer offer while managing the ongoing investment program to support scalability and long-term growth.

Catch is part of OneDigital, the company’s group digital division, which includes its group subscription program, called OnePass. Wesfarmers is investing in systems, processes and capabilities to support its data and digital ambitions. Excluding Catch, OneDigital was expecting to make an operating loss of $100 million in FY23.

However, as a whole, Wesfarmers noted in late October that “Australian consumer demand continues to be supported by low unemployment and high levels of accumulated household savings, but rising interest rates and the impact of inflation are starting to affect consumer behaviour.”

Some consumer feedback and shopping patterns indicate that some customers are becoming more price sensitive as they try to manage household budgets. Wesfarmers thinks its businesses, “well known for their everyday low prices”, can outperform relative to others.

Wesfarmers share price snapshot 

The Wesfarmers share price has climbed more than 10% since the start of 2023, as the business regains some of the lost ground in 2022.

The post Wesfarmers share price drops on Catch news appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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