Bumper trans-Tasman profit for Wesfarmers

Last updated 16:07 14/02/2013

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Perth-based conglomerate Wesfarmers has boosted first-half profit by a healthy 9.3 per cent to A$1.3 billion ($1.6 billion), thanks in part to strong performances from Bunnings and Kmart.

Revenue for the six months ending December 31 rose 3 per cent year-on-year to A$30.6b.

Managing director Richard Goyder said the results of Coles and Kmart were particularly pleasing, reflecting a successful turnaround in those businesses. 

Coles, the largest business in Wesfarmer's portfolio and an underperformer when it was bought by the Perth company nearly five years ago, grew pre-tax earnings 15 per cent to A$755m.

Earnings at Kmart, which has 15 stores in New Zealand, shot up 25 per cent to A$246m, while same-store sales increased by 3 per cent.

Goyder said the earnings boost was due to improvements in sourcing, reduced markdown activity thanks to better inventory management and pricing, and strong sales growth in Kmart's everyday and seasonal ranges.

"During the half, Kmart continued to reduce prices for its customers who responded favourably through increased customer numbers and bigger basket sizes."

Home improvement chain Bunnings, which has 50 New Zealand stores, posted solid growth for the half-year, Goyder said, with pre-tax earnings up almost 7 per cent to A$518m. That was thanks to service, merchandising, improved productivity and cost management, and sales growth in both the consumer and commercial segments in all trading regions, including New Zealand. 

Same-store sales at Bunnings rose 3.4 per cent in the period.

Goyder said retailer Target's earnings were weighed down by higher costs associated with its transformation plan, falling 20 per cent to A$148m despite revenue rising 0.5 per cent to A$2.1b.

Wesfarmer's coal-selling resources division saw earnings plunge 63 per cent to A$93m, on the back of low coal prices and the strength of the Australian dollar. 

Earnings at its insurance division and its chemicals, energy and fertilisers division both grew, but those at its industrial safety operation fell due to lower sales and margin pressure. 

Goyder said he was cautiously optimistic for the group's second half outlook. That was in spite of continued challenging conditions for its resources and industrial safety divisions, due to economic and market uncertainty.  

"We expect growth from the group's retail businesses as we further improve customer offers and operating efficiencies, and strengthen all of our channels to market," he said
Wesfarmers shares were trading up 3 per cent on the ASX this afternoon, to A$39.60. 

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- BusinessDay.co.nz

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