How did Wesfarmers perform in FY 2019?
For the 12 months ended June 30, Wesfarmers reported a 4.3% increase in revenue from continuing operations to $27,920 million and a 27% lift in earnings before interest and tax (EBIT) to $2,974 million.
On the bottom line, profit after tax excluding significant items came in 13.5% higher year on year to $1,940 million.
This allowed the Wesfarmers board to declare a fully franked final dividend of 78 cents per share. When combined with its interim and special dividends of $1.00 per share each, this brings its full year dividend to a fully franked $2.78 per share.
What were the drivers of the result?
The Bunnings ANZ segment delivered an 8.1% increase in EBIT to $1,626 million in FY 2019. This was driven by total store sales growth of 5.2% and same store sales growth of 3.9% over the period. Management advised that this reflects the diversity of its customer base and the resilience of its product offering despite softening conditions in residential housing market.
The Kmart Group segment (continuing operations) posted a disappointing 13.7% decline in EBIT to $540 million. The Kmart business was impacted by flat comparable sales growth, lower growth in apparel and non-seasonal products, the exit from the DVD category, and a temporary reduction in on-shelf availability for some items. Whereas the Target business saw same store sales decline 0.8% and the failure of its customer value proposition “to resonate with customers in a sustainable way.”
The Industrials segment grew its EBIT by 4.4% to $519 million. The comprised a 14.2% lift in EBIT by the WesCEF business to $433 million, which offset a 27.1% decline in EBIT by the Industrial & Safety business.
The Officeworks segment was a solid performer in FY 2019, recording a 7.1% increase in EBIT to $167 million. This was driven by strong sales growth in all channels, improving sales density, good costs control, and strong momentum in the B2B segment.
No real guidance was given for the year ahead, however management advised that it believes it is well-positioned for growth over the long term.
It said: “Given the diversity & resilience of portfolio, the Group remains well placed for a range of economic conditions. Businesses within the portfolio are well-positioned to continue to deliver long-term growth in shareholder value.”
How does this compare to expectations?
According to a note out of Goldman Sachs, it was expecting Wesfarmers to report underlying revenue of $28 billion and EBIT of $2,841 million. This means that Wesfarmers is more of less in line with Goldman’s revenue estimate and has smashed its EBIT estimate.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.