This article is from the Australian Property Journal archive
CUSTOMERS feeling the cost-of-living pinch have been spending more at major discount retailer Kmart, helping to deliver parent company Wesfarmers a strong $1.42 billion first-half profit.
Wesfarmers – which also owns Bunnings, Officeworks and Target – saw its share price jump by 5% on the release of its interim results, despite a warning of continued domestic cost pressures and international supply chain issues.
The 3% increase in profit on the prior corresponding period (pcp) came with 0.5% increase in revenue to $22.67 billion, helped by Kmart’s 4.8% increase in revenue to $5.99 billion.
Kmart posted a 7.5% increase in comparable sales and record earnings of $601 million, up by 26.5%.
“Wesfarmers’ retail divisions executed strongly during the half, responding effectively to changing customer needs as households increasingly sought out value,” said Wesfarmers managing director Rob Scott.
“Kmart Group delivered record earnings for the half, reflecting the market-leading value credentials of its Anko products as well as actions to drive cost efficiencies, and a moderation in some key input costs.”
As a result of profit growth and strong cash flows for the half, the Wesfarmers declared fully-franked interim dividend of $0.91 per share, an increase of 3.4% on the pcp.
Bunnings’ revenue growth was a modest 1.7% to $9.96 billion, and Officeworks a similar 1.8% to $1.68 billion.
Officeworks opened three new stores in the period.
Performance across the conglomerate was lumpy. Revenue at its online marketplace Catch was down nearly 38% to $136 million and recorded a reduction in operating losses.
Meanwhile, the chemicals, energy and fertilisers division saw revenue drop 21.2% to $1.1 billion.
Earnings for the latter were impacted by lower global commodity prices relative to the elevated pricing environment over recent years, Wesfarmers said.
It said the “strong value credentials and expanding offer of everyday products across the Group’s retail businesses make them well positioned in the current environment and for any improvements in consumer sentiment”.
“While Australian inflation has moderated over the last 12 months, current inflation and interest rates remain elevated, and consumers continue to focus on value and manage spending carefully.
“Domestic cost pressures in Australia and New Zealand are expected to remain elevated, driven by inflation, labour market constraints and wage cost increases, and energy and supply chain costs. The group is monitoring ongoing pressures in international supply chains and key shipping routes, and has implemented additional contingencies where possible to mitigate the risk of interruptions.”
