Wesfarmers, Australia’s biggest private employer, posted a 1.2% rise in half year profit to $1.393 billion on a strong performance in its retail businesses including Coles and Bunnings.
The company’s overall revenue increased by 4.7% to $33.46 billion, buoyed by the highly competitive supermarket and hardware businesses but dragged down by the resources division.
In early trading, Wesfarmers shares were down 3.7% to $41.99.
Managing Director Richard Goyder says the retail portfolio delivered a strong 9.2% increase in EBIT to $176 million supported by good Christmas seasonal trading in all businesses.
At Coles, EBIT (earnings before interest and tax) increased 5.6% to $945 million on revenue growth of 3.1%. Food and liquor recorded sales grew 6% to $937 million.
The supermarket is performing better than its main competitor, Woolworths, in the face of increasing competition from discount players such as Aldi. Woolworths ahs been reporting flat results and forecasting more of the same. It is due to release half year results at the end of this week.
At Wesfarmers, its hardware earnings at Bunnings’ increased 13.4% to $701 million on revenue growth of 10.9%.
Wesfarmers is restructuring department stores Kmart and Target. Guy Russo, Kmart’s current managing director, will become Chief Executive Officer of a new department stores division, overseeing both Kmart and Target. Target managing director Stuart Machin will take on a new senior role in July.
Kmart’s earnings grew 10.4% to $319 million on revenue growth of 12.6%. Target’s earnings of $74 million were 5.7% higher, with revenue up 1.9%.
However, the resources division posted a $118 million loss, compared to a $35 million profit last year, as lower commodity prices continued to cut into the business, including lower coal prices and $70 million of currency hedge book losses.
Goyder says the company is generally optimistic in its outlook, except for mining and resources-related areas.
“The group’s retail businesses have good sales momentum and are well positioned in an environment where consumers are expected to remain value-conscious and manage household budgets carefully,” he says.
Wesfarmers declared a fully franked interim dividend of $0.91 a share, up 22.2%.
The divisional earnings results in detail:
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