Wesfarmers’ shares fell, then rose yesterday as investors digested what was a widely-anticipated weak result after the accounts cleansing revealed earlier this month in big write downs on its flailing UK hardware adventure and its stuttering Target department store chain in Australia.
The shares fell to an early low of $41.20, but then recovered through the rest of the session to $41.99 at the close, up 3%. The retail giant revealed net profit plunged 86% for the first half, after the heavy losses from its Homebase hardware expansion into the United Kingdom and Ireland.
The retail conglomerate reported net profit after tax of $212 million for the six months to December 31, down from $1.57 billion for the same period a year earlier.
That was driven by the $1 billion write down announced earlier this month to the value of its Bunnings UK and Ireland (BUKI) business and a $300 million write down to the value of the Target chain.
Without these impairments net profit after tax was down 3.3% at $2.35 billion.
Interim dividend was left at $1.03 a share.
At Coles, Wesfarmers’ biggest business, like-for-like food and liquor sales slowed again to a growth rate of 0.9% compared to the same half last year, when sales grew 1.3%.
Rival Woolworths had outperformed Coles in sales every quarter since December 2016, and is due to reveal its figures later today.
Earnings before interest and tax at Coles fell 14% t0 $790 million in the half as prices fell on average by 1.6% during the period, more than the 0.9% fall in the prior corresponding half.
Wesfarmers chief executive Rob Scott said the drop in earnings was due to the annualisation of investments in customer service made in 2017, lower property earnings, lower revenue following the sales of the Coles credit card receivables, and lower fuel sales.
Earnings at Bunnings Australia and New Zealand grew 12.2% to $864 million off total sales growth of 10.2% and remains the growth powerhouse for the group.
But losses at Bunnings UK and Ireland widened to $165 million for the half, a blow out from the $48 million loss in the same half last year.
Sales also again weakened at Target, falling 6.2% on a like-for-like basis. However, that is a slowing of the decline seen a year ago, when sales fell 18.1% as the group cleaned out and dumped unwanted stocks.
Target’s decline was offset by sister department store Kmart, where like-for-like sales grew 5.4% and total sales grew 8.6% – a slowing of growth from the first half last year (5.7% and 9.1%, respectively) but enough to see the combined department stores division’s earnings rise 6.6% to $518 million.
Officeworks revenue grew 9.7% to just over %1 billion and earnings rose 9.7% to $68 million.
