UK exit slashes Wesfarmers profits

UK exit slashes Wesfarmers profits

Profit at retail and industrials giant Wesfarmers (ASX: WES) was down by almost $1.7 billion in FY18 due to the group's pull-out from Bunnings United Kingdom and Ireland (BUKI), but on a like-for-like basis revenue was up slightly and profit rose 5.2 per cent.

In a shareholder brief today, chairman Michael Chaney and managing director Rob Scott pointed to a year of "significant change" that required "decisive actions", including the demerger of supermarket chain Coles which is expected to be completed in November.

And while the final NPAT result of close to $1.2 billion may be well below levels seen in previous years, dividends have remained the same as in FY17 at $2.23 per share.

The introduction of online transactional capability for home hardware retailer Bunnings Australia & NZ helped it edge ahead of Coles by a whisker to become Wesfarmers' leading source of profit, recording "very strong results" along with Officeworks and the Department Stores business which includes Kmart and Target.

Coles' contribution was overtaken by Bunnings largely because of the impact of one-off items in the first half, but the supermarket has been buoyed by growth in not only customer transactions and units sold, but also the average basket size - an interesting development in a retail era defined by growth in convenience shopping and e-commerce. 

The group also announced Guy Russo would retire as CEO of the Wesfarmers Department Stores division and managing director of Target

Kmart managing director Ian Bailey will assume the additional responsibility of leading the Wesfarmers Department Stores division from 1 November 2018, while Wesfarmers Department Stores CFO Marina Joanou has been promoted to Managing Director of Target effective immediately.

Grou managing director Rob Scott says Russo has made a significant contribution since joining Wesfarmers 10 years ago as managing director of Kmart, leading the transformation of the brand into Australia's most successful department store before becoming CEO of the new Department Stores division in early 2016.

"Guy leaves a valuable legacy that is reflected in the record profit result for the Department Stores division for the 2018 financial year," Scott says.

"He has led a world-class turnaround of Kmart into one of Australia's best product development and retail companies. Under Guy's leadership, Kmart's earnings have increased more than five-fold and more recently he has led a significant reset of Target, reducing its cost base and returning it to profitability. The record Department Stores earnings announced today demonstrate the enormous value that has been created for shareholders."

Scott describes Bailey as a natural successor to Russo, having initially played an instrumental role in the turnaround of Kmart and then successfully leading the continued growth of the business over the last two years.

"I am pleased to announce the promotions of Ian and Marina. Both have been outstanding leaders in Wesfarmers and their knowledge of Kmart and Target makes them uniquely well-placed to drive continued growth across Department Stores," he says.

"These appointments demonstrate the strong talent development and succession planning processes in Wesfarmers."

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