Wesfarmers share price in focus as profit slips to $2.35b

Wesfarmers has posted a $2.35 billion profit and a $1 final dividend.

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Key points

  • The Wesfarmers share price could be one to watch after the ASX 200 giant posted its earnings for the 2022 financial year
  • Wesfarmers reported an 8.5% increase in revenue and a 2.9% fall in earnings before interest and tax
  • Bunnings saw pre-tax earnings lift 0.9% in FY22 while that of Kmart and Officeworks fell 39.7% and 14.6% respectively

The Wesfarmers Ltd (ASX: WES) share price could be in for a big day on the market after the company posted its full-year earnings this morning.

Wesfarmers shares closed Thursday's session trading at $47.64.

Wesfarmers share price on watch as revenue lifts 8.5%

Here are the key takeaways from the S&P/ASX 200 Index (ASX: XJO) conglomerate's financial year 2022 results:

  • Revenue came to $36.8 billion – an 8.5% increase on that of the prior corresponding period (pcp) excluding significant items
  • Earnings before interest and tax (EBIT) fell 3.8% to $3.6 billion, excluding significant items
  • Net profit after tax (NPAT) reached $2.35 billion ­– a 1.2% slip, or a 2.9% fall excluding significant items
  • Basic earnings per share (EPS) came to $2.078
  • Wesfarmers declared a $1 fully franked final dividend, bringing its full-year payout to $1.80 – a 1.1% increase

The company's crown jewel, Bunnings, reported $2.2 billion of earnings before tax excluding significant items, a 0.9% year-on-year improvement. Its revenue also rose 5.2% to $17.75 billion.

Meanwhile, Kmart Group posted $418 million of pre-tax earnings – a 39.7% fall – and Officeworks' pre-tax earnings came to $181 million – a 14.6% drop.

Looking outside of the company's retailers, Wesfarmers Chemicals, Energy & Fertilisers (WesCEF) brought in a record $540 million of pre-tax earnings – a 40.6% improvement. Its industrial and safety division saw $92 million – a 31.4% lift and its health division posted a $25 million loss.

What else happened in FY22?

COVID-19 lockdowns hit the company hard in late 2021 and early 2022, as the Omicron variant took hold. That resulted in high absenteeism and reduced consumer traffic.

 Meanwhile, supply chain issues took their toll on Wesfarmers' businesses.

The major news from the ASX 200 giant was the establishment of OneDigital and its acquisition of formerly ASX-listed Australian Pharmaceutical Industries – home of Priceline.

The Wesfarmers share price slumped 26% over the course of last financial year.

What did management say?

Wesfarmers managing director Rob Scott commented on the company's earnings, saying:

The group's financial results for the year reflect the material impact of COVID-19 on trading conditions during the first half, which included weeks where almost half of the group's retail stores were either subject to trading restrictions or closed.

Bunnings continued to demonstrate the resilience of its operating model and ability to deliver growth through a range of market conditions. Record earnings in WesCEF reflected elevated global commodity prices and continued strong operating performance. It was also pleasing to report continued improvement in the performance of Wesfarmers Industrial and Safety.

Kmart Group was the most materially impacted by trading restrictions in the first half. Results for Kmart Group improved significantly in the second half, with Kmart and Target delivering strong second-half earnings growth of 19.4%, benefiting from actions taken in recent years to optimise the store network. Lower earnings in Officeworks for the year reflected the impact of trading restrictions and the margin impact of sales mix changes, as well as increased investment in the supply chain, data and digital capabilities and to support the launch of new products.

What's next?

Wesfarmers hasn't provided any new earnings guidance today. Though, it did provide a brief update on the first seven weeks of the 2023 fiscal year.

Retail trading conditions have remained robust through the period. Sales growth has been particularly strong in Kmart Group, with sales significantly higher on both a one- and two-year basis. Bunnings also continues to see positive sales growth while those of Officeworks were in line with the prior year.

WesCEF is expected to continue to benefit from higher commodity prices and will keep considering capacity expansion opportunities for its existing operations and progressing the Mt Holland lithium project's development.

Wesfarmers expects to post capital expenditure of between $1 billion and $1.25 billion for FY23.

Wesfarmers share price snapshot

The Wesfarmers share price has fallen 21% year to date. It's also down 26% over the last 12 months.

For comparison, the ASX 200 has dumped 7% so far this year and 6% since this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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