Retail delivers for Wesfarmers

DOWN, down — for Woolworths, that is. Lower food and grocery prices have pushed up earnings for Coles, which is well and truly wiping the floor with its rival.

LOWER food and grocery prices have helped drive up Coles’ underlying earnings for parent company Wesfarmers.

Wesfarmers underlying profit rose 8.3 per cent to $2.44 billion in the 12 months to June 30, from $1.51 billion a year earlier. On a statutory basis the profit was down more than nine per cent, due chiefly to the sale of its insurance business.

Earnings from Coles rose 6.6 per cent to $1.78 billion for 2014/15, a slowdown from the nine per cent rise a year ago.

However comparable food and liquor sales ticked up by 3.9 per cent, compared to 3.7 per cent in 2013/14.

Wesfarmers managing director Richard Goyder said lower prices and operational efficiencies were behind the supermarket chain’s increased sales.

He said while competition was expected to remain high in the food and grocery sector, Coles and the conglomerate’s other retail businesses — Bunnings, Officeworks and Kmart — all had good sales momentum going into the 2016 financial year.

Wesfarmers managing director Richard Goyder.

And Target is expected to improve as its transformation continues in the year ahead.

“With consumers remaining focused on value, the group’s portfolio of retail businesses is expected to benefit from strategies that drive further value for customers and improvements in merchandise offers,” Mr Goyder said in a statement on Thursday. Bunnings’ earnings increased 11.1 per cent to $1.08 billion, with revenue up 11.6 per cent thanks to strong sales growth in all categories.

Another 15 to 18 Bunnings stores are planned to open in each of the 2016 and 2017 financial years.

Officeworks’ earnings rose 14.6 per cent to $118 million with revenue growth of 8.8 per cent on the back of new merchandise categories, upgraded store layouts and improved service.

At Kmart, flagging DVD and video game sales failed to dent earnings, which lifted 18 per cent to $432 million while revenue rose 8.2 per cent.

Wesfarmer’s problem child, Target, suffered a 1.8 per cent dip in revenue but earnings rose 4.7 per cent to $90 million.

An ongoing transformation program helped drive sales volumes higher, offsetting lower prices.

CMC Markets chief market analyst Ric Spooner described the result as solid amid a tough trading environment that has produced mixed profit results for retailers.

“This looks like a solid result and there appears to be no major misses,” he said.

Shares in Wesfarmers were 61 cents, or 1.5 per cent, higher at $40.99 at 1219 AEST.

RETAIL A SHINING LIGHT FOR WESFARMERS

* Net profit: down 9.3pct to $2.4b

* Underlying profit: up 8.3pct to $2.4b

* Operating revenue: up 0.2pct to $62.45b

* Final dividend: up six cents to $1.11