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Kmart Drives Strong Wesfarmers Results: Bunnings, Officeworks Flat

Wesfarmers has delivered a 14.1 per cent leap in net profit to $1.384 billion, driven by Kmart more than doubling its earnings during the final half of 2022.

Revenue for the Perth conglomerate reached $22.558 billion for the half-year, up 27 per cent.

EBIT was $2.16 billion, up 13.4 per cent year-on-year. Wesfarmers has increased its interim dividend by 10 per cent.

Shares are up 3.5 per cent this morning, in early trading.

Revenue for Kmart Group increased 24.1 per cent to $5.714 billion for the half, with earnings increasing 114.0 per cent to $475 million.

Wesfarmers CEO Rob Scott said the results reflect strong operational execution, as well as the normalisation of trading conditions as they cycle the period of COVID-related restrictions in the final half of 2021.

“Customers continued to respond positively to Kmart’s lowest price positioning, and sales growth was achieved across all categories,” Scott said.

“Target’s performance reflected continued improvements in the product offer, particularly in the focus categories of apparel and soft home. With more normal trading conditions during the half, the full benefits of the significant network change program undertaken across Kmart and Target were also able to be realised.”

Kmart saw retail sales growth of 17.1 per cent, with Target retail sales up 2.8 per cent.

Bunnings saw a modest earnings increased of 1.5 per cent, to $1.278 billion, from revenue of $9.792 billion — up 6.3 per cent from the previous period.

Scott noted that prolonged wet weather on the east coast impacted spring trading”, but praised the “resilience of its operating model and the continued strong execution of its strategic agenda.”

Officeworks saw earnings edge up by 3.7 per cent, from $82 million to $85 million. Revenue increased 4.5 per cent to $1,651 million for the half.

Scott attributed this sales growth to an increase in demand across print & create, stationery, art and education, all areas impacted by lockdowns in late 2021.

“The sales mix towards lower-margin technology and furniture categories declined for the half, but remains higher than pre-COVID levels,” Scott noted. “Continued price investment and higher promotional activity, partly due to increased competitive intensity in technology” also impacted the bottom line.

Catch was the biggest bugbear for Wesfarmers, with losses blowing out to 108 million, from 44 million during the previous corresponding period.

“The disappointing financial performance in Catch reflected operational and execution challenges in addition to the broader decline in online retail demand during the period,” Scott said.

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