Kmart, Bunnings building as Officeworks stays deskbound
Derek Rose |
Kmart and Bunnings have again performed well for corporate parent Wesfarmers, but Officeworks needs a turnaround and a foul stink is plaguing operations at its lithium refinery outside of Perth.
The industrial and retail conglomerate, which also owns the Priceline pharmacy chain and a fertiliser business, on Thursday reported a 9.3 per cent rise in first-half net profit to $1.6 billion.
Revenue increased by 3.1 per cent to $24.5 billion in the six months ended December, compared to the same period in 2024.
“I’m pleased that we’ve been able to deliver strong growth in profit while keeping prices low in our retail businesses,” Wesfarmers chief Rob Scott told analysts on an earnings call.
“This reinforces our longstanding commitment to delivering a win-win outcome for customers and shareholders, especially at a time when inflation is persistent.”
Wesfarmers’ Kmart Group grew earnings by 6.1 per cent to $683 million as same-store sales climbed 2.8 per cent to $6.4 billion, with Kmart’s sales growth partially offset by Target’s more difficult trading, particularly in seasonal apparel.
“Kmart Group continued to benefit from its strong value credentials and the uniqueness of the Anko product range,” Mr Scott said.
Bunnings had higher sales across all of its products, with same-store sales up 4.2 per cent to $10.7 billion and earnings climbing five per cent to $1.39 billion.
The lift included consumer and commercial segments, particularly home repair and maintenance, Mr Scott said.
The opening of Wesfarmers’ lithium hydroxide refinery in the West Australian industrial precinct of Kwinana has not gone so well.
Intermittent odour issues have plagued the Covalent Lithium plant, a joint venture with Sociedad Quimica y Minera de Chile SA, hindering its production ramp-up.
Neighbours have reportedly complained of a stink like burning plastic so severe it can cause physical symptoms.
Mr Scott said engineering works to address the odour were under way and due to be completed by mid-2026.
In the meantime, Covalent Lithium has been selling unrefined spodumene concentrate.
At Officeworks, sales grew 4.7 per cent to $1.8 billion but earnings fell 21.8 per cent to $68 million, in part due to $15 million in costs associated with a program to transform the retailer to a low-cost operating model.
Bank of America analyst David Arrington told Wesfarmers management on the earnings call he did not understand what was going on with Officeworks.
“I must admit, when you look at JB Hi-Fi’s performance, they’re really doing very well; it looks like Officeworks has been left behind,” he said.
Mr Scott said Officeworks had performed “OK” during the past five years but it had unfulfilled potential and was lagging behind Wesfarmers’ other market-leading retail businesses.
Wefarmers brought in John Gualtieri, who was the CEO of Kmart and Target, to lead Officeworks in August.
Mr Gualtieri had flagged Officeworks had many opportunities to improve its range and customer proposition, Mr Scott said.
“I don’t think there’s any question that Officeworks has arrived and has indeed been quite successful in selling technology products over the last decade, but obviously, a lot of work ahead.”
Wesfarmers shares were down four per cent to a three-week low of $85.71 on Thursday afternoon.
AAP