Retailer: Hard days to come
Shuttered stores dent growth
WESFARMERS has trumpeted the strength of its conglomerate model through the Covid-19 pandemic but warned of “tough” times ahead for the country.
The retailer booked a 40.2 per cent jump to $2.38bn full year net profit, with four out of its five divisions posting earnings growth.
However, chief executive Rob Scott warned of “tough” times ahead amid the economic and mental health toll taken by lockdowns across the country.
“I think the next couple of months are going to be really tough, they are going to be tougher, because the longer we are in lockdown obviously the more (of a) challenge it is,” he said.
“I think we are rapidly approaching the situation where the benefits of widespread, prolonged lockdowns don’t outweigh the negative consequences of lockdown.
“There is a serious social, economic and mental health impact from extended lockdowns and we are starting to see that. We need to overlay a much greater degree of empathy and compassion to our lockdown strategy because we are starting to see households doing it incredibly tough.”
Mr Scott said he supported the plan set out by the national cabinet to begin opening up the economy when the country hits 70 per cent vaccination.
“We support the national plan, essentially, accelerate vaccinations, go as fast as we can with vaccinations then start opening once we get to 70 per cent and more broadly 80 per cent,” he said.
Mandatory vaccinations might not work for all businesses, including Wesfarmers, but Mr Scott believes that people who do get vaccinated should be able to enjoy more freedoms, and the government should consider this to encourage others
Wesfarmers shares retreated 2.75 per cent to $62.20 on Friday as the broader market also finished down.
The ASX200 lost 2.9 points to 7488.3 points while the All Ordinaries Index dipped 10.3 points or 0.13 per cent to 7760.1.
The Australian Bureau of Statistics unsurprisingly reported a 2.7 per cent seasonally adjusted fall in retail turnover in July – the biggest monthly fall this year – due to lockdowns and stay-at-home orders in many parts of the nation.
The retail sector was particularly hit hard in NSW, where the first full month of lockdown resulted in a near 9 per cent slump in turnover.
It was the largest fall of any state and territory since August last year and the third biggest monthly decline on record. CommSec senior economist Ryan Felsman said retail spending was likely to continue to fall in August and September as lockdowns drag on in NSW and potentially Victoria.
“Additionally, global supply chain disruptions, rising unemployment and potentially reduced housing goods related demand could also weigh on consumer spending,” Mr Felsman said.
Wesfarmers reported revenue rose 10 per cent to $33.94bn for the year to June 30 but Mr Scott revealed a dent to its strong momentum coming out of 2021 driven by lockdowns and shuttered stores.
The poor performance was most acute for its Kmart and Target chains which recorded a 14.3 per cent slide in sales since July – with that sales plunge worsened by the permanent closure of some stores. For Bunnings, its sales were down 4.7 per cent for the first seven weeks of the new
financial year. For the year to June 30, the home renovation boom helped lift Bunnings sales by 12.5 per cent to $16.871bn and earnings by 19.7 per cent to $2.185bn, while at Officeworks sales rose 8.7 per cent to $3.03bn and earnings increased 7.6 per cent to $212m.
For the Kmart Group (Kmart, Target and Catch) sales were up 8.3 per cent to $9.98bn and earnings climbed 69 per cent to $693m.
Wesfarmers joined the
ranks of Australian companies showering their shareholders with capital returns, dividend and special dividends this reporting season, with it announcing a $2.3bn capital return.
Wesfarmers announced a proposed return of capital to shareholders of $2 per share.
The conglomerate declared a final dividend of 90c a share, down 5c per share.
The full year dividends of $1.78 per share are up 17.1 per cent on 2020.
I think the next couple of months are going to be really tough, they are going to be tougher, because the longer we are in lockdown obviously the more of a challenge it is. Rob Scott