Wesfarmers has flagged major markdowns and store closures at Target, as new department stores chief Guy Russo kicks off a strategic review, clears slow-moving winter stock and exits product lines that overlap with Kmart.

Wesfarmers managing director Richard Goyder said the conglomerate had no plans to get rid of the Target brand – as some analysts have suggested – after merging the two fiercely competitive chains into a single operating division run by the former Kmart boss.

However, Mr Goyder said more loss-making or underperforming Target stores would be converted to Kmart stores and he flagged more "co-ordination" between the chains in areas such as property and procurement to boost returns after a 75 per cent slump in profits at Target over the past five years.

"People are underestimating the opportunities and over-estimating the extent of the (merger)," Mr Goyder told analysts and media on Thursday after announcing record sales growth at Kmart in the March quarter and another lacklustre period for Target.