AUSTRALIA’S biggest retailer says the growing demand for apparel in Australia is the reason it is struggling to make money. 

“The demand for clothing is definitely there,” Kmart chief executive Peter Hatton said.

“We’ve been seeing more and more people in our stores in recent months, but the fact is that the demand is still not there.” 

The retailer, which has about 500 stores in Australia, has experienced a decline in sales since its peak in the late 1980s and early 1990s. 

Kamp’s chief executive, Paul Smith, said he expected the retailer to miss its profit target for the first time this financial year. 

Smith said it had cut its store size by more than 40 per cent since 2012.

“The last two years has been a bit of a roller coaster ride for us,” he said. 

The company said it would now focus on improving its efficiency and cost structure and hiring more staff to help it meet demand. 

It said it planned to cut its workforce by 20 per cent this financial quarter. 

Mr Smith said he was pleased with the strong performance of the Australian Manufacturing Innovation Program, which had helped to drive up the cost of manufacturing in the country. 

But he said it was difficult to predict what the future would bring.

“I would hope it will continue to be an investment of $50 billion, and that we’re still a year out from that,” he told AAP.

You’re going to be spending a lot more time and energy in the manufacturing of things, and there are not many ways to spend that energy, and you’re going do it more inefficiently.”