Wesfarmers profit falls, despite Bunnings boom

20/08/2020

It is clear that Bunnings remains Wesfarmer’s stand out performer, after the Big Box reported a total store sales growth of 14.7 per cent, with store-on-store sales increasing by the same percentage, according to Wesfarmer’s end of financial year results released today. Bunnings also delivered a strong second half with a store-on-store sales growth of 25.8 per cent, as customers spent more time working and undertaking projects at home, according to the results. 

Wesfarmers also acquired Catch and benefitted from the massive shift to online shopping by consumers throughout the pandemic, while its Officeworks business benefitted as consumers set up home offices during lockdown.

Despite the increase in sales on-line and in-store, Bunnings Managing Director, Mike Schneider, said there was no doubt the second half of the year has been challenging.

“COVID-19 has also presented our team with some significant challenges and I would like to thank all of them for their incredible hard work and their commitment to keeping themselves, each other and our customers safe,” he said. 

The results also showed Target continuing to drag after Wesfarmers posted a 69.2 per cent fall in full-year profit to $1.697 billion, according to The Australian.

The Wesfarmers result was also hit by more than $800 million in impairments and restructuring charges flowing from weaker divisions, according to The Australian, with post-tax significant items from continuing operations of $461 million recorded for the year comprising of $83 million in post-tax restructuring costs and provisions in Kmart Group, post-tax non-cash impairments of $437 million in Target and $298 million in Industrial and Safety.

When commenting on today’s results, Wesfarmers Chief Executive Rob Scott remained focussed on the Bunnings and Officeworks businesses, which he said rapidly adapted to the changing needs of their customers.

“The result in chemicals, energy and fertilisers also reflected a continued solid performance, while the performance of Industrial and Safety was below expectations and included a $310 million pre-tax impairment as a result of the deterioration in the outlook for customer demand in some segments and uncertainty around future economic conditions,” Mr Scott said in The Australian.

“Total online sales across the group, including the Catch marketplace, increased to $2.1 billion. This reflects the significant investment in digital capabilities over recent years, as well as the continued change in customer preferences towards online shopping,” he said.

While Bunnings’ operating revenue increased by 13.9 per cent to $14.999 billion and earnings increased 13.9 per cent to $1.85 billion, earnings at Kmart and Target fell 23.5 per cent to $410 million. Officeworks’ earnings rose 13.8 per cent to $197 million, Wesfarmers’ industrial safety operations saw earnings dive by 53.5 per cent to $39 million, according to The Australian.

Revenue for fiscal 2020 rose 10.5 per cent to $30.846 billion. The Wesfarmers accounts showing a statutory profit of $1.697 billion which was down sharply compared to 2019 because the profit that year of $5.51 billion included $3.57 billion relating to the demerger of Coles and the divestment of other businesses, according to The Australian.