Scott said the Australian economy was starting from a strong base, with an unemployment rate near the lowest in 50 years and high levels of household savings, but rising inflation and higher costs of living were putting pressure on many parts of the economy, including household budgets. .
The company’s biggest profit-maker, hardware giant Bunnings, had enjoyed positive sales growth so far in the new fiscal year, while sales at Officeworks were in line with a year earlier.
Scott’s comments came after the company reported a statutory net profit of $2.35 billion for the year, beating many analysts’ predictions. Excluding significant items in the prior period, net income fell 2.9 percent for the year but rose 13.1 percent in the second half as restrictions were eased and business conditions improved.
Revenue rose 8.5 percent to $36.84 billion, while earnings before interest and taxes fell to $3.63 billion from $3.78 billion a year earlier.
Shares of Wesfarmers gained 69¢ to $48.33 on Friday after the strong rally in the second half allowed the company to declare a higher final dividend of $1 per share, bringing dividends to $1.80 for the year. .
The group’s Mount Holland lithium project is also on track, but Scott said that with mounting cost pressures and a skills crisis, it was more difficult for him to commit to other investment projects under consideration, including the Mount Holland capacity doubling and capacity expansions. in its chemical unit.
“All I’m saying is that in the current environment, the cost and the risks are higher than they should be. And we hope that if we can see some progress on skilled migration, that will go a long way in giving us the confidence to move forward with some of these important investments,” he said.
Scott said the group’s financial results in 2022 were severely affected by COVID-19 in the first half, when almost half of its stores were subject to business restrictions or closed for weeks.
Conditions improved during the middle of June, but sales at Kmart Group still fell 3.5 percent to $9.64 billion for the year, dragged lower by Target, where revenue fell nearly 16 percent. . Profits fell about 40 percent for Kmart Group, which also included online marketplace Catch Group.
Wesfarmers acquired Catch in June 2019 for $230 million in hopes of increasing online sales at its discount retail chains. Catch is now part of a new data and digital division, OneDigital, and is expected to post a loss this year.
Jarden analysts led by Ben Gilbert said full-year results were good, with Kmart a standout, and momentum from the retail division was strong and likely to persist into this half-year period.
MST Marquee analyst Craig Woolford was cautious on the outlook for calendar 2023, noting that if elevated costs continue, there could be pressure on earnings in fiscal 2024.
Kmart’s stock availability improved during the second half and it was now deliberately offering a few extra everyday products to mitigate supply chain pressures.
Scott cautioned that there is some volatility and cost pressures persist in some raw materials, freight and operating expenses.
Scott said in a media call that he felt good about Bunnings’ prospects even as interest rates rose and home prices came under pressure, the hardware giant’s sales rose 5.2% to $17,750. million for the year, with earnings up 0.9% to $2.2 billion. .
Bunnings managing director Mike Schneider said that for the first time in three years, stores in Victoria would be able to trade through the spring and on Father’s Day, which was a big sales booster for the retailer.
He noted that the $70 million in COVID-19 costs for the year should moderate as the weather warms in the summer and there are fewer flu and other illnesses that cause sick days.
Despite Bunnings’ exceptional growth in recent years, during which it added $4.6 billion to its core sales and profits topped $3 billion, Schneider saw no slowdown due to structural change in the way customers think about their products. homes.
“It has become a workplace, a classroom, and they spend more time at home. When you work from home two or three days a week, there is more wear and tear on the house and you see more things to do,” he told analysts.
“Over the last few years, customers have really developed a fairly new range of DIY skills, and we’ve been able to bring the products, services and categories to market to be able to meet those needs.”
Mr Scott said there was strong demand on the business side of Bunnings, with a shortage of workers and builders evident with a working pipe, while on the consumer side there was still strong DIY demand.
The cost of raw materials such as wood, cotton, polyester and plastic resin had started to recover, which would eventually flow to customers, he said. He added, however, that inflation would persist in the coming months.
Officeworks revenue increased 4.6% for 2022 to $3.17 billion, but earnings were 14.6% lower due to business restrictions and increased investment in supply chain, data and digital capabilities .
Wesfarmers’ retail businesses comprise six of Australia’s largest retail brands, with more than 150 million digital interactions and 40 million transactions each month and a network of more than 1,500 retail stores.
Sales have been strong recently at its latest acquisition, Australian Pharmaceuticals Industries (API), which is the key asset found in Wesfarmers’ new health unit. Scott has big plans to create a $10 billion healthcare division, after the $774 million acquisition was completed earlier this year, but he is currently thinking about the integration and the kind of investments needed to transform the business.
Scott said that while he was very focused on the short term, he had been positioning the business for the long term.
“We have made tremendous progress, preparing our group for future investment in health and lithium investments and digital platforms. So even though the market is very focused on the next few months, to be honest, I’m more focused on the next few years,” he said.