Bunnings still Wesfarmers' top performer

Wesfarmers Ltd's retail group remains a mixed bag with Coles showing signs of improvement and Bunnings starring as the steelmaking slowdown hampers the diversified conglomerate's coal division.

And Wesfarmers says it is eyeing new acquisitions in the industrial and insurance sectors after bolstering its balance sheet following a $2.9 billion rights issue in January, which raised $100 million more than expected.

Chief executive Richard Goyder said on Tuesday the group would not diversify into new sectors but was open to good buys in its existing industries.

"I don't see us expanding the span of businesses we're in but I do see some opportunities across the industrial sphere and ... we've been acquiring more businesses in insurance," Mr Goyder said.

Wesfarmers carries about $6.2 billion in debt related to its $20 billion takeover of the Coles supermarket chain in 2007, after paying it down faster than initially expected, according to an analyst.

Mr Goyder said Wesfarmers would preserve and protect the balance sheet, then look for growth opportunities.

"We want to be bulletproof until we're very confident credit markets have re-opened," he said.

"Having said that, we obviously raised more money than we thought we would through the equity raising."

Finance director Terry Bowen said about $1.1 billion of Wesfarmers' $1.8 billion capital expenditure budget in fiscal 2009 was earmarked for the former Coles Group assets, including Kmart and Target.

Sales at Target rose 6.1 per cent in the March quarter and Kmart performed poorly in January and February, although the federal government's stimulus packages supported March sales.

Mr Bowen indicated ongoing Coles store refurbishments would not be as aggressively pursued as before, saying the company would "be sensible ... in terms of when we roll it out".

Mr Goyder said some of the refurbishments seen in pilot stores - such as his upmarket local store in Claremont, Western Australia - would not be applied to all Coles stores.

"They just won't be able to sustain it.

"It will work in some and not in others but they will look and feel very similar."

Coles lags behind Woolworths Ltd in terms of market share but Mr Goyder said it was improving on all fronts.

Total food and liquor sales for the March quarter rose 7.6 per cent to $5.3 billion.

"We're seeing pretty strong sales growth strong without having done actually a lot with the business other than fix some basics," Mr Goyder said.

"But there's a lot more to do.

"A lot of the key strategic work isn't coming through on the numbers yet."

Mr Goyder described the performance of the cash-cow Bunnings hardware chain as "sensational", saying it continues to gain market share and expand its product range.

"We had a very strong January, February was a bit weak ... and trading since then continues to be strong," he said.

"We are doing some work in Bunnings and in all of our businesses to make sure we're sourcing from competitive markets.

"In China ... we are seeing, because of the weakness in that economy, our suppliers being more aggressive on pricing now.

"They are prepared to reduce pricing in US dollars to get the business."

Its coal mining division is being hit hard by lower metallurgical coal demand and prices, and has locked in hedge losses of $85 million in fiscal 2010.

Wesfarmers said the longer-term outlook for the industry remained positive.

Shares in the company rose 46 cents at $20.86 on Tuesday.