By Aimee Chanthadavong

Wesfarmers has lifted its net profit by 6.3 per cent for the FY13 due to a strong earnings achieved by its retail portfolio.

The company reported it made a net profit of $2.3 million. Its retail businesses achieved a solid growth in earnings for the year of 7.7 per cent, with strong performances recorded in all businesses other than Target.

Managing director Richard Goyder said that it was pleasing to have recorded an increase in the group’s profit.

“Team capabilities and cultures have been transformed over recent years and the businesses have worked hard to deliver efficiencies that have been reinvested in significantly improved merchandise offers and better value for customers,” he said.

The Coles division continues to spearhead the group, delivering earnings growth of 13.1 per cent for the year to $1.5 billion and head of sales growth of 5.2 per cent.  This was mainly due to the increase in volume growth, particularly in its fresh food categories.

Bunnings also recorded another good result with earnings up 7.5 per cent to $904 million. Sales growth was 7 per cent for the year, after it increased 10.2 per cent in the fourth quarter. The company said customers are responding favourably to Bunning’s o going range innovation and improvements to customer service. There also plans to open more new stores, including 10 smaller format stores.

In Officeworks, despite challenging market conditions and deflation in technology related products, its performance improved during the year, with the business achieving earnings growth of 9.4 per cent to $93 million. Its operating revenue increased by 1.6 per cent for the year to $1.5 billion, supported by a good trading performance in the fourth quarter where total sales increased 5.3 per cent over the prior period. Within this result, online sales were reported to be performing strongly.

Kmart was another division that reported positive results with earnings growth up 28.4 per cent to $344 million. This builds on the 31.4 per cent earnings growth achieved in the prior period. Much of this success was underpinned by the increase in customer transactions and units sold, which more than offset price deflation as the company continues to reinvest in lower prices. Most categories performed well with the exception of entertainment due to high levels of price deflation in music and DVDs.

Target’s results, however, were disappointing and below expectations. Its earnings almost dropped by half from $244 million in the previous year to $136 million. While units sold was up, price deflation across its key categories, as well as challenging sales conditions of its entertainment products, affected trading. Also, in the fourth quarter there were high level clearance activities to help address excess inventory levels as sales fell short of plans due to warmer weather causing a late start to the winter selling season.

Despite there being more subdued forecasts for the Australian economy and challenging conditions, Goyder said he remains optimistic about the group’s outlook.

“We expect continuing growth from the group’s retail portfolio. Coles, Kmart and Officeworks have plans to build on the strong foundations established during their respective turnarounds, and the outlook for Bunnings is positive,” he said.

“As Target executes its transformation we expect earnings to progressively recover, but this improvement will take time.”