Bunnings UK hits profit

Failed experiment hurts Wesfarmers bottom line

WESFARMERS has posted a near 60 per cent drop in fullyear profit as the fallout from its disastrous Bunnings UK and Ireland experiment savages its bottom line.

The Perth-based conglomerate, which owns a swag of the nation’s most prominent retail businesses including Coles, Bunnings, Kmart, Target and Officeworks, has also announced department store chief managing director Guy Russo will retire from the role in November.

Mr Russo built Kmart into a discount department store powerhouse and was most recently tasked with reviving Target.

He will be replaced by Kmart managing director Ian Bailey.

Department stores chief financial officer Marina Joannou will take over as managing director of Target.

Net profit at Wesfarmers fell 58 per cent to $1.2 billion for the year the June, it reported yesterday. The drop came as the group absorbed a $1.25 billion writedown on the value of its now sold Bunnings UK and Ireland business and a fresh $300 million hit against the book value of struggling Target.

Underlying profit from continuing operations – a measure which strips out the impact of one-off events such as writedowns and adjusts for businesses sold during the year – rose 5.2 per cent to $2.9 billion.

The result was more than analysts had been expecting and shares in Wesfarmers rose by more than 2 per cent in early trade.

Revenue from continuing operations, which strips out Bunnings UK and a coal mine the group sold, rose 3 per cent to $66.9 billion.

Earnings at Coles, which is being spun off into a separately listed company, slumped 6.8 per cent to $1.5 billion.

Like-for-like sales growth, a key industry metric which strips out the impact of stores opening and closing, stood at 1.1 per cent in the 2018 financial year compared to 1 per cent in the 2017 financial year. Earnings at Bunnings Australia and New Zealand operations rose 12.7 per cent to pass $1.5 billion while the now sold UK and Ireland division notched up a $266 million loss.

Earnings at department stores, which takes in Kmart and Target, rose 21.5 per cent to $660 million.

Earnings at Officeworks rose 8.3 per cent to $156 million.

Wesfarmers declared a fully-franked final dividend of $1.20 a share, unchanged from a year earlier.