Wesfarmers sales jump as Target stages recovery in COVID shopping boom
Retail conglomerate Wesfarmers appears well on track in its plans to turn around struggling discount retailer Target, with the business now expected to report a full-year profit for the first time in years.
Wesfarmers told investors on Thursday sales across its Kmart and Target division had been exceptionally strong across the six months to the end of December, growing 9.1 per cent at Kmart and 13 per cent at Target.
Earnings growth for the division jumped 44.3 per cent to just over half a billion dollars, marking a significant turnaround for the two chains, which have been major beneficiaries of the shopping boom brought on by the COVID-19 pandemic.
“[Target is] now expected to be profitable for the full financial year before one-off costs,” the company said. Wesfarmers reported $34 million in one-off costs for the half related to the restructuring of Target, which will see it shut or convert 167 stores to the Kmart chain around the country.
Wesfarmers’ broader business also reported sizeable jumps in sales, with the company’s total revenue for the half rising 16.6 per cent to $17.7 billion, and net profit rising 25.5 per cent to $1.4 billion.
Hardware chain Bunnings was the main driver of these bumper results, with sales at the division soaring 27.7 per cent on a comparable basis as Australians rushed to its stores to improve their homes in the pandemic, and earnings topping $1 billion for the half, up 35.8 per cent to $1.27 billion.
Managing director Rob Scott said the result was pleasing, especially Wesfarmers’ growth in online sales, which doubled across the group and topped $2 billion for the half.
“Good progress to accelerate the growth of Kmart and address the performance in Target continued during the half and, on a combined basis, Kmart and Target delivered a record earnings result for the period,” he said.
“Sales and transaction volume uplifts from Target stores that have been converted to Kmart stores continue to be very encouraging, and 19 stores were converted during the half. Target’s profitability improved significantly, supported by strong demand and the ongoing simplification of the business.”
Wesfarmers declared an 88 cent dividend, up 17 per cent on the prior corresponding half, payable March 31.
More to come
Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.
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