Melbourne, July 14 - Australian conglomerate Wesfarmers Ltd said on Monday it would take five years to overhaul its struggling Coles supermarket chain, and signalled sliding consumer sentiment would take a toll on its other retail businesses.
Wesfarmers bought supermarket chain Coles Group Ltd last year for $18.5 billion, the country's biggest takeover, and has previously said it will take three to five years to turn around the underperforming outfit.
"It's an uncomfortable truth that Coles suffered from chronic underinvestment in its stores and customer service in an effort to drive profit in what we believe was an unsustainable way," Chief Executive Richard Goyder told the Australia-Israel Chamber of Commerce.
Goyder said the scale of change required to make Coles successful should not be underestimated.
"We expect it to take five years to deliver the substantial transformation required," he said.
Wesfarmers' shares were down 2 percent at A$32.30 at 0528 GMT, in a broader market down 1.2 percent.
Coles has been losing market share to larger rival Woolworths Ltd, with sales through to December failing to keep pace with inflation. Coles no longer reports quarterly sales data.
Goyder said he disputed analyst claims that Wesfarmers has been slow to begin the overhaul of Coles.
He said divisional structures had been set up for the Coles retail units and reviews of the Kmart discount chain and the Coles supply chain had been completed. Coles decided to keep rather than sell Kmart.
Goyder also signalled after his speech that the economic slowdown and drop in consumer confidence will be felt at Wesfarmers' retail businesses other than supermarkets.
The downturn in sentiment "will impact on our discretionary spending businesses," he said in response to a question. "But I view that as an opportunity... It's a great time to get our house in order," and cut inventory, he added.
Wesfarmers' units that depend on discretionary spending include Bunnings, the country's largest hardware and home improvement chain, and discounters Kmart and Target.
Retail spending has slowed sharply this year as consumers struggle with soaring food and petrol prices, combined with interest rate increases from both the central bank and commercial banks.
National Australia Bank on Monday became the latest bank to raise mortgage rates independently of the Reserve Bank.