Wesfarmers’ profit up 6 per cent as sales surge at Coles

JANE HARPER
AUGUST 15, 2013
HERALD SUN

ANOTHER strong year from the Coles supermarket business has helped Wesfarmers chalk up a 6.3 per cent boost in net profit.

The conglomerate booked a profit of $2.26 billion for the year to June across all its retail, resources, insurance, industrial and chemicals businesses.

Revenue across the group was up 3 per cent to $59.8 billion.

While Coles was again a standout performer, Wesfarmers said discount department store Target continued to be the problem child among its retail business, having recorded a “disappointing” year.

The group said that despite a tough retail climate, food and liquor sales at Coles were up 5.5 per cent to $28.1 billion.

Key like-for-like sales, which strip out the impact of store that have opened or closed, were up 4.3 per cent for the year.

The result outpaced larger rival Woolworths, which last month reported a 2.7 per cent lift in like-for-like sales.

“Despite a challenging retail environment where consumers remained focused on value, Coles continued to record strong volume growth, particularly in fresh categories, which demonstrates that its value based offer is resonating well with customers,” the company said.

Discount department store Kmart achieved total sales of $4.2 billion up, 2.7 per cent from the previous year.

Like-for-like sales were up 2.1 per cent, while earnings soared 28.4 per cent to $344 million for the year.

Wesfarmers said the an increase in customer transactions and the number of items sold offset the impact of lower prices in store.

It said the strong growth reflected ongoing improvements in sourcing, range, inventory management and the in-store offer.

“Coles and Kmart both recorded strong results, reflective of the positive momentum generated in these divisions through their turnaround plans,” Wesfarmers managing director Richard Goyder said.

“Team capabilities and cultures have been transformed over recent years and the businesses have worked hard to deliver efficiencies that have been reinvested in significantly improved merchandise offers and better value for customers.”

But Mr Goyder said Kmart’s discount stablemate Target still had improvements to make.

The group in May warned that earnings were expected to dive due to heavy discounting, damaged and aged stock and a slow start to winter.

Target reported total sales of $3.7 billion, down 1.7 per cent from a year earlier, while like-for-like sales were down 3.3 per cent.

Sales in the three months to June tumbled 9.8 per cent to $898 million, compared with the same period a year ago.

Wesfarmers in April parachuted in Coles’ operations director Stuart Machin to take the helm as managing director at the troubled retailer.

“Target’s result for the year was disappointing and below expectations,” Mr Goyder said.

Hardware chain Bunnings recorded a 7.5 per cent boost in earnings to $904 million as the group continued to invest in its range and category expansion.

Like-for-like sales were up 4.4 per cent.

Earnings at Officeworks were $93 million, up 9.4 per cent from the previous year.

Wesfarmers shares were up 1.3 per cent to $42.70 this morning after the results were announced.