Target writedowns offset Coles earnings
Strong profit results from Wesfarmers’ Coles and Bunnings stores have been overshadowed by hefty writedowns linked to Target and its coal assets.
MD Richard Goyder said Coles’ and Bunnings’ strong sales and earnings growth were offset by Target’s weak underlying performance and restructuring costs, and the impact of low commodity prices in the resources business.
Earnings for Coles supermarkets grew 4.3 per cent to $1.86 billion, while earnings from the Bunnings hardware chain increased 11.6 per cent on revenue growth of 21.4 per cent, with the newly acquired UK Homebase stores contributing from February 28.
Coles’ food and liquor revenue grew $937 million, with comparable food and liquor sales up 4.3 per cent.
Wesfarmers’ profit in the year to June 30 plunged 83.3 per cent to $407 million compared to a year ago, due to $2.2 billion in pre-tax writedowns from its embattled discount department store Target and its Curragh coal mine.
The Perth-based conglomerate’s underlying profit, excluding the writedowns, dropped 3.6 per cent to $2.35 billion.
Goyder said Coles saw a strong result given food deflation driven by fierce competition from Woolworths and the rapidly expanding discount supermarket chain Aldi.