Coles, Bunnings boost Wesfarmers

ColesAn earnings increase from each of Wesfarmers’ retail assets have helped the company lift its underlying profit 8.3 per cent to $2.44 billion and increase its final dividend six cents to $1.11 per share.

On a statutory basis Wesfarmers’ profit was down more than nine per cent on a year ago, due chiefly to the sale of its insurance business.

“The group’s retail portfolio delivered strong earnings growth,” said Wesfarmers CEO, Richard Goyder.

“All our retail businesses grew earnings and benefited from their hard work to deliver an improved merchandise offer and genuinely better value for customers.”

Earnings from Coles were up 6.6 per cent to $1.78 billion, with food and liquor sales up 5.3 per cent.

“In a competitive supermarket sector, Coles’ improved sales momentum was a good result,” Goyder said.

Goyder said operational efficiencies and investment in lower prices resulted in growth in customer transactions, basket size and sales density.

“Investment in the fresh supply chain and building long-term supplier relationships remained key initiatives during the year, resulting in increased fresh produce participation as customers responded positively to improvements in product quality, value and availability,” he said.

“While the liquor business produced relatively flat earnings growth, there were encouraging customer responses to early transformation work focused on range rationalisation, better value and store network improvement. The convenience business performed solidly during the year, despite lower fuel volumes.”

Hardware chain Bunnings’ earnings increased 11.1 per cent to $1.09 billion on revenue growth of 11.6 per cent.

“Bunnings’ performance was very strong and reflects sound strategy execution,” Goyder said.

Officeworks’ earnings of $118 million were 14.6 per cent higher for the period, with sales growth of 8.8 per cent to $1.71 billion.

“The performance of Officeworks was clearly its best under Wesfarmers’ ownership and a highlight for the period,” Goyder said. “Merchandise category expansion and a strong focus on delivering an improved customer offer through all channels to market drove strong growth in earnings and return on capital.”

At Kmart earnings grew 18 per cent to $432 million.

“Strong sales and earnings growth reflected work done to reinvest sourcing benefits and process efficiencies into lower prices for customers, as well as expanding and refurbishing the store network. Merchandise innovation and increasing quality perception also contributed to Kmart’s strong performance,” Goyder said.

Target’s earnings of $90 million were 4.7 per cent higher, while revenue was 1.8 per cent below the prior year.

“Despite only a small lift in earnings, Target’s transformation plan progressed well,” Goyder said.

“Sales momentum improved through the year as customers responded positively to improvements in Target’s range and everyday value. The benefits of a higher proportion of ‘first price, right price’ sales, improved sourcing and good cost control, offset necessary investments in the supply chain and lower prices for customers.

“As the group enters the 2016 financial year, the Coles, Bunnings, Officeworks and Kmart businesses all have good momentum, with Target expected to improve as its transformation plan continues.”

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