REPORTING SEASON: Wesfarmers Limited (WES)

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Figure 1: Wesfarmers Limited 12 month chart


Wesfarmers Limited (WES) Tough competition in the retail sector

 Retail and energy firm Wesfarmers Limited (WES) reported a weaker than expected profit for the first half of the 2015 financial year. The market had expected the large slide in WES’s energy division and accounted for the impact of asset sales over the year, but was surprise with the lower than expected returns and margin growth from its main retail arm Coles.

 The sales of Air Liquide for $95 million and its Insurance division for $63 million reduced its fall in profit and helped offset higher raw material costs and foreign currency debt restructuring.

 Wesfarmers Retail units did list strong growth but Coles earnings were below market expectations, as competition in the food and beverage markets continues to heat up. Coles did see an increase in customer transactions, volumes and per basket spend.

 After a few tough years, Target showed signs of improvement in the last quarter of 2014 after heavy discounting hit earnings in 1Q15. Kmart also beat market expectations with solid sales and earnings growth backed by improved product ranges and inventory management. Bunnings continued to perform well supported by productivity improvements and good cost management.

 Wesfarmers Industrial and Energy divisions were still weak. Earnings from Wesfarmers Mining division fell 41%, because of the slide in global coal prices, as expected.

 WES will pay a $0.89 to shareholders on 2 April 2015.


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Juliana Roadley, Market Analyst,