Wesfarmers, parent company of Kmart and Target, has confirmed a rise in profit despite mixed results across its businesses.
The company revealed a net profit after tax of $1,429 million for the half-year ended December 31, 2013, up 11.2 per cent on the previous corresponding period.
The result was backed by strong earnings growth in its Coles, Officeworks, Kmart and Bunnings businesses.
Specifically, Kmart recorded an earnings growth of 5.7 per cent to $260 million for the period, driven by further improvements in merchandising and a strong focus on cost efficiency.
Total store sales growth was 1.7 per cent for the half, with comparable store sales increasing 0.3 per cent.
Sister business Target, however, reported earnings of $70 million, 52.7 per cent below the prior corresponding period.
Comparable sales declined 4.2 per cent during the half, with comparable sales declining 3.3 per cent in the second quarter.
Commenting on Target's lacklustre results, Wesfarmers said that trading conditions were challenging due, in particular, to the continued clearance of aged and excessive winter stock, which also affected the timing of the summer range launch.
In addition, the decision to not repeat increasingly high levels of promotional activity of the prior year had a short-term adverse effect on trading.
Wesfarmers managing director Richard Goyder said he was pleased with the increase in the group’s profit, given the challenging conditions experienced by the resources and industrial and safety divisions, and reduced earnings recorded at Target.
“The strong performance of our retail businesses, excluding Target, underpinned the increased earnings achieved by the group,” Goyder said.
“Good growth in Coles’ earnings highlighted its successful transition to the next phase of growth, building on the solid foundation established during its initial turnaround plan. I am also delighted with the smooth leadership succession at Coles which we announced yesterday.
“The result achieved at Bunnings was also strong, with the business continuing to execute its strategic agenda to plan.
“As foreshadowed, Target’s earnings were significantly affected by clearance activity during the half. Importantly, good progress was made in renewing its senior leadership team to improve organisational capability to oversee the turnaround of the business.
The profit announcement comes hot on the heels of a recent management shuffle at Wesfarmers, which will see Coles managing director Ian McLeod move to a senior role within the wider Wesfarmers Group on July 1, 2014. He will be replaced by current chief operating officer of Coles, John Durkan.