Wesfarmers boss Rob Scott says its dominant retail brands Kmart and Bunnings will emerge from the slowdown in consumer spending with a bigger slice of the discount and hardware markets, capitalising on price and range to win over budget-minded shoppers. Both businesses achieved record earnings over fiscal year 2023, helping Wesfarmers to a 4.8 per cent rise in net profit of $2.47 billion, topping market expectations. The WA-based conglomerate posted an 18.2 per cent boost in revenue to $43.55 billion for the 12 months ended June 30, also ahead of expectations. Group earnings before interest and tax rose 6.3 per cent to $3.86 billion. However, Wesfarmers’ chief executive warned that momentum is fading. “In the first seven weeks of the 2024 financial year we’ve seen sales growth for the Kmart Group continue to benefit from strong trading results in Kmart, but the growth has started to moderate from the second half of last financial year,” Mr Scott said. “We continue to see sales growth in Bunnings in line with what we saw in the second half of last year. And we’ve seen that growth continuing [in] both consumer and commercial areas.” Kmart posted 13.7 per cent higher sales in the June half, while Bunnings advanced 2.4 per cent. Mr Scott expects cost pressures to persist, driven by inflation, labour market constraints, higher wages and domestic supply chain costs, but balancing this out is population growth and low unemployment. Annual sales at Bunnings gained 4.4 per cent to $18.54 billion, as earnings rose 1.2 per cent to $2.23 billion. But same-store sales growth in the second half was just 0.8 per cent, while earnings growth was virtually flat as consumers put spending on larger DIY projects and big-ticket purchases on ice. Wesfarmers’ next largest division, Kmart Group, which includes the Target brand, posted sales of $10.64 billion, up 16.5 per cent. Earnings surged to a record $769 million. Same-store sales at Kmart jumped 14.5 per cent, reversing a contraction in the previous year. Officeworks’ sales and earnings rose, with the private label range growing three times faster than branded product, indicating shoppers are trading down. Wesfarmers’ new health unit, which includes Priceline parent Australian Pharmaceutical Industries, posted sales of $5.31 billion. Earnings were only $45 million due to lower-margin wholesale drug sales, and investment in a new Sydney fulfilment centre. Wesfarmers’ chemical, energy and fertiliser division, WesCEF, posted sales of $3.3 billion, an 8.7 per cent gain, with earnings up by double digits, boosted by global ammonia prices. Chemicals earnings will be dented by lower global ammonia pricing this year, but demand from the West Australian mining and agricultural sectors is expected to remain robust. Ray David, Blackwattle Investment Partners portfolio manager, said Kmart did better than expected, with well-managed inventory and cost control. “The headwinds that Bunnings is facing, they are pretty significant: declining housing starts with a declining renovation [and] restoration market. And the fact that they’ve been able to sort of maintain positive sales even in the first couple of weeks of July I think is a pretty big testament to them taking share,” he said. (ICE SYDNEY)

Fonte notizia: Financial Review