By Emma Koehn
Cash-strapped shoppers flocking to Kmart for everything from fashion to exercise equipment have helped power profits at retail giant Wesfarmers close to five per cent higher for 2023.
The $56 billion operator of the Kmart, Target and Bunnings brands revealed on Friday morning that its revenues had risen by 18.2 per cent for the year to $43.6 billion.
Profits were up by 4.8 per cent to $2.47 billion, with Kmart Group and Officeworks the standout performers for the year.
Chief executive Rob Scott called out the success of discount department store Kmart, which recorded strong growth across all categories and in all regions of Australia over the past year.
“As people become more value conscious, and also as the quality of products improves, we’re attracting a lot of new shoppers,” he said.
The brand has attracted a social media cult thanks to its low-cost lines of homewares, but Scott said that customers had been branching out to spend in other areas at the retailer.
“We have materially improved the quality of fashion and apparel category, [and] now people are increasingly buying their clothes at Kmart, whereas previously they may have been only buying home products,” he said.
Other products experiencing solid growth include activewear, exercise equipment and health and beauty products, Scott said.
Kmart Group, which includes the Kmart and Target brands, recorded revenues up 16.5 per cent to $10.6 billion and earnings up 52.3 per cent for the year, to $769 million. Kmart Group had continued to benefit from “strong trading results” in the first weeks of the 2024 financial year, though this has moderated from the momentum seen in the six months to June.
The optimistic outlook for Kmart comes after other discount department store retailers flagged tougher conditions this week. Woolworths boss Brad Banducci said the company’s Big W brand faced challenging trading conditions as families cut back their spending on discretionary goods like small appliances.
Office and school supplies business Officeworks saw revenues rise 5.9 per cent to $3.3 billion, while earnings were up 10.5 per cent to $200 million.
Wesfarmers said its major earnings driver, DIY giant Bunnings, delivered solid results for the year, but its earnings were flat for the year overall, up by 1.2 per cent to $2.2 billion. Earnings at Bunnings in the six months to June 30 were up by just 0.7 per cent to $952 million.
The group’s health business, which includes pharmacy operator Priceline, also grew sales during the year, and is now the group’s third-largest revenue driver behind Bunnings and Kmart, generating $5.3 billion in 2023.
The company told investors that the group’s strong full-year result meant it was upping its dividend, with the final fully-franked payout coming in at $1.03 per share. This brings the full-year dividend payment to $1.91 per share, a 6.1 per cent increase on 2022.
Wesfarmers said cost pressures would continue to be elevated in the face of inflation and wage cost increases, but said its brands were able to leverage their scale to and sourcing capabilities to offset some of this.
The stock opened 0.7 per cent stronger to $49.76, putting shares ahead by 9.2 per cent year-to-date.
Source: Thanks smh.com