Coles owner Wesfarmers says it sees signs of a much needed recovery in spending.
The retail giant reported yesterday it had again lifted profit in the 2013/14 year, to $2.69 billion.
It said all of its businesses, even the troubled Target, were showing positive signs in recent weeks.
That’s despite the jobless rate hitting a 12-year high in July, managing director Richard Goyder said.
“In all of our businesses, even Target, we are seeing good customer numbers and good transactions,” he said.
“We are not seeing in the retail side any signs that the economy is on the slide, in fact we are seeing positive signs.”
Wesfarmers expects further growth from Coles, Bunnings, Kmart and Officeworks in the 2014/15 year, though Target will continue to face challenges.
It is the group’s worst performing business, and significant changes are being made to its operations and stores.
Target managing director Stuart Machin said slow winter sales have forced stock clearances, and the performance of the business in the first half of 2014/15 would be affected by heavy discounting.
Wesfarmers took $677 million off the value of the company during the year, but that was more than offset by more than $1 billion made on the sale of its insurance underwriting business and an industrial business.
Those proceeds added to the company’s massive cash reserves, which it now plans to give back to shareholders through a $1 per share payment.
The distribution is contingent on a ruling from the Australian Taxation Office (ATO), and comes on top of a final dividend of $1.05 per share, plus a special dividend of 10 cents per share to mark the company’s 100th year.
News of the payouts lifted Wesfarmers shares to a record high, gaining 3.8 per cent to $45.66.
Given the company’s strong position, Goyder did not rule out acquisitions, including offshore opportunities.
“We look at offshore opportunities but we’ll continue to be very disciplined with any investments we make,” he said.
“We don’t feel any pressure whatsoever. We are seeing good growth in our existing businesses but we do have the capacity to review opportunities and move quickly should the right opportunity come.”
The company’s driving force remains Coles, where earnings grew nine per cent to $1.67 billion.
Coles’ sales rose despite another slide in grocery prices, as the number of transactions grew.
But the Coles liquor business did not perform as well.
A recently launched restructure of the division, aimed at improving aspects such as the layout out of its stores, is expected to improve its earnings.
