Wesfarmers 2013 results boosted by Coles’ strong performance
Wesfarmers has announced earnings before interest and tax (EBIT) of $3,658 for 2013, up 3.1 per cent on the previous year. The Company said the results reflected strong earnings growth from supermarket group Coles, as well as Bunnings, Officeworks and Kmart.
The strong results from Coles, Bunnings, Officeworks and Kmart came from strong transaction growth driven by improvements in value, offer and service, as well as improved product sourcing, in-store execution and stock management, according to Wesfarmers.
Wesfarmer’s said department store Target’s earnings were “disappointing”, and reflected price deflation, clearance of excess inventory and increased costs.
Wesfarmers said Coles revenue for the year ended 30 June 2013 was $35,780 million, up 4.9 per cent from $34,117 million in 2012. EBIT in 2013 was $1,533 million, up 13.1 per cent from $1,356 in 2012.
Food and Liquor
Coles food and liquor revenue for the year ended 30 June 2013 was $27,933 million, up 5.2 per cent from $26,561 million in 2012. EBIT in 2013 for Coles food and liquor was $1,368 million, up 11.4 per cent from $1,232 million in 2012.
Wesfarmers said the Coles results came from “investing in better value”, by adding hundreds more big brands and Coles brands to its ‘Down Down’ campaign; investing in “locally sourced” produce and improving “supply chain velocity”; and from trialling new categories in its concept stores and new branded and Coles brand ranges in food and non-food lines.
Coles concept stores performed well in 2013, according to Wesfarmers, and its Coles Online site was in the “final customer trial phase”.
Convenience and fuel
Coles convenience stores saw a revenue of $7,847 million in 2013, up 3.9 per cent from $7,556 in 2012. EBIT grew 33.1 per cent from $124 million in 2012 to $165 million in 2013.
A better fuel offer contributed to the growth in this sector of the Coles business, according to Wesfarmers, as did a stronger mix of grocery sales in Coles Express Stores and the extension of the ‘Down Down’ campaign into Convenience.
Wesfarmers said its Bunnings business saw a trading revenue growth of 7 per cent between 2012 and 2013, with consumer sales growth of 6.4 per cent and commercial sales growth of 9.6 per cent.
Bunnings opened 23 new trading locations in 2013, including 10 new warehouse stores, 10 smaller format stores and three trade stores.
Office supplies business Officeworks saw a revenue growth of 1.6 per cent from $1,482 million in 2012 to $1,506 million in 2013, according to Wesfarmers. EBIT increased by 9.4 per cent from $85 million to $93 million.
Officeworks opened 13 new stores in 2013.
Department store Target saw a revenue drop of 2.1 per cent, from $3,738 million in 2012, to $3,658 million in 2013. EBIT dropped 44.3 per cent from $244 million in 2012 to $136 million in 2013.
Target’ sManaging Director Stuart Machin said the department store group’s earnings were affected by price deflation, excess inventory requiring high levels of clearance activity, higher than expected shrinkage and restructuring costs and increased costs of doing business.
Challenging conditions have continued into the 2014 financial year, according to Target. The department store said it will focus on getting “back to basics”, and will see a “strengthened leadership team” in place by Christmas 2013 to oversee longer term transformation.
Kmart and Kmart Tyre and Auto Service
The Kmart group saw revenue increase 2.8 per cent from $4,055million in 2012 to $4,167 in 2013, with EBIT increasing 28.4 per cent from $268 million in 2012 to $344 million in 2013.
Kmart opened 6 new department stores and 5 new Kmart Tyre and Auto stores in 2013, as well as completing 10 major Kmart store refurbishments.
Wesfarmers Insurance revenue grew 8.8 per cent from $1,195 million in 2012 to $2,083 million in 2013.
Strategic growth initiatives
Wesfarmers said its strategy for Coles was to continue category and network development, “realise supply chain and operational efficiencies”, and improve “multi-channel integration” and targeted loyalty offers. It also plans to leverage the improvements achieved through its Coles Liquor stores and “optimise” its Convenience store network.