Wesfarmers’ winners and losers: Coles, Bunnings and Kmart boost profit to $2.126 billion

Strong performances from Coles, Bunnings and Kmart have bumped up Wesfarmers’ net profit after tax for the year to $2.126 billion.

The results, released yesterday, showed an increase of 10.6% on the previous year that was well ahead of market expectations.

Wesfarmers is known as a diversified organisation as it generates income from a host of different businesses, but food and alcohol form the backbone of the group. This was made clear in the yearly results, which showed clear winners and losers among the group’s businesses.

The winners

Coles

Coles was a star performer for Wesfarmers, with earnings before interest and tax rising more than 16% for the year to $1.3 billion.

Ian McLeod, managing director of Coles, pointed to the supermarket’s move to lower prices, which he said was set to continue with Coles’ “down, down” campaign.

He also noted Coles’ category innovation, with more than 1,000 new brands introduced over the past year and Coles’ clothing line, Mix clothes, now stocked in at least 67 Coles stores.

Coles has also driven profits through the revamp of its FlyBuys loyalty program, which has more than seven million cardholders.

However, McLeod said Coles Liquor had a disappointing performance in 2012 due to increased competition from “big box” alcohol stores.

Bunnings

Bunnings delivered earnings before tax of $841 million, which was ahead of estimates with an increase of almost 5%.

Tom Piotrowski, market analyst at CommSec, said Bunnings’ strong performance defied the tough conditions in the building and renovation sectors and was ahead of estimates.

“Bunnings is an area the market has been treating with some caution. We hear a lot about light demand for credit in all forms and the fact that the building and renovation market is still experiencing degrees of headwinds,” he said.

The home improvements chain opened 16 new stores and reported “strong investment” in its property pipeline and existing stores.

Kmart

Discount department store Kmart continued to perform well ahead of expectations, with earnings before tax of $266 million.