NATIONAL: The parent group of department stores Target and Kmart will continue to pump money into its retail division despite asking department heads to come up with contingency plans in the face of a prolonged economic downturn.
Wesfarmers yesterday reported a net profit of $879 million after tax for the six months ended December 31, up 46 per cent from the same period last year.
It is believed the jump in earnings, earmarked in a statement to the Australian Stock Exchange yesterday (February 16), was exaggerated by the fact the previous first half included only five weeks of earnings from the Coles retail businesses acquired for $19.3 billion in November 2007.
Wesfarmers chief Richard Goyder said the company's retail businesses, which include the Coles supermarket chain, Kmart, Bunnings and Target, had "generally weathered the downturn well".
"Our turnaround retail businesses are generally performing well despite the challenging conditions," he said.
Operating revenue for the Target division was $2.09 billion, with comparative store-on-store sales growth for the period at four per cent. Earnings before interest and tax were $215 million.
Goyder credited strong results in women's youth apparel driven by the Federal Government's stimulus package for the result.
Eleven new stores Target stores were opened during the period, eight full-line Target and three Target Country, taking the total number of stores to 283. The group has earmarked five new stores for completion by June 30.
The company's Kmart division did not perform quite as strongly with earnings before interest and tax of $75 million.
Goyder said "significant changes" were made in the business during the period with the executive team now focused on improving sustainable long-term performance.
Two new Kmart stores will open in the second half, taking the total number to 170 in Australia and 15 in New Zealand. Three to ten refits are also expected to be completed towards the end of the year.
Goyder said he had asked the heads of each operating division to come up with contingency plans in the event that an expected slump is worse than expected.
"We're looking at a number of scenarios where things may get better earlier than we foreshadow or worse than foreshadowed, so we can be in a position to deal with any circumstance that arises in the various markets that we deal in over the next year or two," he said.