Investors appear undeterred by Wesfarmers Ltd's (ASX: WES) announcement of an 86.6% slide in statutory net profit with shares up 2.75% at $41.88 at the time of writing.
Diversified supermarket giant Wesfarmers' half-year results revealed Bunnings UK and Target impairments of more than $1.3 billion were behind the 86.6% slump in statutory net profit.
But news flagging Bunnings UK's losses had blown out was not a huge surprise to shareholders, with Wesfarmers shares sliding 10% this month in the lead up to its results.
Shareholders may also be buoyed by news they will keep their fully-franked interim dividend unchanged at $1.03 per share, payable on April 5.
Here's how the results panned out.
Wesfarmers logged an $86.6% decline in statutory net profit to $212 million, but underlying net profit dropped just 2.7 per cent to $1.53 billion after significant items were stripped out.
Wesfarmers' statutory net profit of $212 million fell well short of $1.6 billion forecasts, but the $1.53 billion underlying net profit result was not far behind this expectation. However group revenue – up 2.8% to $35.9 billion – was below forecast by about $140 million.
Strong performances out of Officeworks and Bunnings ANZ were not enough to counterbalance operating losses of $165 million out of the troubled Bunnings UK&I – which fell $117 million below its previous corresponding period loss of $48 million.
Bunnings UK and Ireland, which Wesfarmers only acquired in 2016, suffered a 15.5% fall in sales to $875 million, with same-store sales slumping 13.4% over the half.
Earnings before interest and tax before one-off items dropped 3.3% to $2.35 billion, which was in line with forecasts.
The good news for Wesfarmers was strong momentum in Bunnings ANZ, Kmart and Officeworks.
Bunnings ANZ EBIT rose 2.2% to $864 million, with top-line sales also shooting up 10.2% to $6.5 billion thanks in part to 11 new stores being added to the portfolio and a slight upward movement in same-store sales growth to 9%.
More new stores and an online component should help push Bunnings ANZ forward for the remainder of FY18.
Kmart took centre stage in the department store category, with figures revealing an 8.6% rise in total sales and a 7.2% rise in earnings to $415 million – offsetting weaker sales at Target which struggled through the half with a 6.2% fall in top-line sales.
But the combined department store division's earnings were up 6.6% to $518 million and Kmart & Target profit figures won't be reported separately going forward.
No recovery is expected for Coles in the second half after earnings fell 14.1% to $790 million with margins hit by investments in service. Sales were down 0.4% to $19.9 billion.
The half-year report revealed while Coles' sales momentum is expected to be strong in the second half, higher wage costs and lower convenience store earnings could see a similar profit hit logged for Coles in the June half.
Rival Woolworths Group Ltd (ASX: WOW) is yet to release its results for the same period, with reports due on February 23, but Woolworths has outperformed Coles in every sales quarter since December 2016 so will be one to watch.
Highlights
-86.6% slump in statutory net profit to $212 million
-Underlying net profit down 2.7% to $1.54 billion
-$165 million operating losses for Bunnings UK and Ireland
-EBIT before one-off items down 3.3% to $2.25 billion
-Group revenue up 2.8% to $35.9 billion
-Fully-franked interim dividend flat at $1.03
Bunnings ANZ
–EBIT up 2.2% to $864 million
-Top-line sales up 10.2% to $6.5 billion
–Same-store sales growth up 9%
Coles
-14.1% fall in Coles profit to $790 million
-Sales down 0.4% to $19.9 billion.
Kmart
-Earnings up 7.2% to $415 million
–Total sales up 8.6%
-Same-store sales up 5.4%
Target
-6.2% fall in top-line sales
-Same-store sales down 6.5%
-Combined department store division earnings up 6.6% to $518 million
