Wesfarmers records 13% earnings slide for Kmart Group

Bunnings and Officeworks continue on growth path.

Wesfarmers has described the performance of the Kmart Group as “below expectations”, albeit moderating trading conditions, with earnings down 13.7% for the year ended 30 June, 2019. Bunnings ANZ and Officeworks continue to be the star performers for Wesfarmers, increasing earnings by 8.1% and 7.1% respectively.

Total sales for Kmart increased 1.5% during the year with flat comparable sales, affected by lower sales growth in apparel, non-seasonal products and the planned exit from the DVD category, offset by modest growth in the home and kids general merchandise categories. Online sales are growing with continued improvements to the online offer through the expansion of its click and collect service.

Four new stores were opened, including one replacement store, one store was closed and 23 store refurbishments were completed during the year. Nine new stores are expected to open in FY20 as well as 23 store refurbishments.

“Kmart continues to invest in its customer offer and price leadership position that has delivered strong returns over the long term, while also making good progress in improving its digital offer,” Scott said.

Total sales for Target declined by 1.5% during the year, reflecting ongoing rationalisation of the store network with comparable sales declining 0.8%. Growth in Target’s ‘Best’ ranges in womenswear, menswear and homeware categories, was more than offset by lower sales in lifestyle, entertainment and beauty.

Online expansion continues to be a priority with a particular focus on click and collect, improved website content and personalisation. One previously committed new store was opened and 15 stores were closed during the year. During FY20, further store closures are planned for Target.

“Although key elements of the Target range continue to grow, its trading results highlight that Target’s customer offer requires ongoing repositioning,” Scott said.

Bunnings

Operating revenue for Bunnings increased 5% to $13.16 billion with total store sales growth of 5.2%, underpinned by an increase of 3.9% in store-on-store sales.

With sales growth achieved in consumer and commercial markets across all product categories and in all major trading regions, the solid result from Bunnings demonstrates the diversity of its customer base and resilient product offering, according to Wesfarmers managing director, Rob Scott.

There has also been significant progress in the expansion of the Bunnings digital offer and continued innovation in merchandise, services and deeper commercial engagement, which supported the growth also.

Following a single store trial in Victoria, the click and collect offer was successfully implemented across all Tasmanian stores in May and June. There is a now a staged rollout of a full online transactional offer for Australia and New Zealand. Bunnings opened 17 new trading locations, including 10 replacement stores during the year.

Officeworks 

Officeworks delivered revenue of $2.31 billion, an increase of 8% on the prior period, with total sales up 7.6%, underpinned by new and expanded product ranges and online enhancements and improvements to the click and collect offer.

Four new stores were opened and two stores were closed during the year. As part of its growth strategy, Officeworks acquired Geeks2U, a national provider of on-site information, communication and technology services, on 1 March 2019.

“Officeworks achieved another strong year of sales and earnings growth while reinforcing its price leadership position,” Scott said. “Key focus areas in FY20 include opening a new distribution centre in Western Australia, continued improvement of its every-channel offer, growing the Geeks2U offer and further building partnerships with the communities in which it operates.”

Wesfarmers reported group net profit after tax (NPAT) of $5.51 billion for the year, including discontinued operations from the demerger of Coles and disposals of Bengalla, Kmart Tyre and Auto Service (KTAS) and Quadrant Energy. NPAT from continuing operations increased 13.5%, excluding significant items, to $1.94 billion.

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