Wesfarmers boss Richard Goyder says there is more it can do to improve the performance of Coles, even after another strong earnings result from the supermarkets business.
Coles lifted its pre-tax earnings almost 11 per cent to $836 million during the six months to December 31, which was built on a near five per cent rise in sales across its supermarkets and liquor stores.
The result helped drive Wesfarmer’s first half net profit to $1.43 billion, up from $1.28 billion a year ago.
Wesfarmers has delivered a significant turnaround in Coles’ performance since taking over the then-struggling supermarkets giant in 2007.
But the conglomerate’s chief executive, Richard Goyder, says there is still more work to be done.
“There are a whole bunch of things we can do to improve it still,” he said on Wednesday.
“That’s store upgrades, that’s new stores, that’s the products we’re offering within our stores and we will achieve that through a better and more efficient supply chain.”
Mr Goyder said incoming Coles chief executive John Durkan, who will replace current boss Ian McLeod on July 1, will deliver new energy to the retailer.
“John will bring a freshness to it and a new energy and will drive some new things in that business, which I think is really important,” he said.
He also praised Mr McLeod, who has driven Coles turnaround over the past five years, saying he had been “an exceptional CEO”.
Wesfarmers on Tuesday announced Mr McLeod would leave Coles at the end of the current financial year to take on a new executive role within the conglomerate.
The strength of Coles was backed up by gains from most of Wesfarmers’ retail businesses during the first half, especially Bunnings which lifted earnings 8.5 per cent higher to $562 million.
But department store business Target performed poorly, with its earnings slashed in half to $70 million after delays in shifting aged and excess winter stock forced it to delay the launch of its spring/summer range.
However Mr Goyder is confident Target can be turned around.
“There has been a lot of work to restructure the business and we’re confident that work will lead to a stronger long term performance.”
Outside of its retail holding, Wesfarmers’ resources division was another source of weakness, with earnings down 36.6 per cent to $59 million due to lower coal export prices.
Meanwhile, the group’s insurance business suffered a five per cent decline in earnings while earnings from the company’s industrial and safety division slipped 17 per cent.
Wesfarmers lifted its interim fully franked dividend to 85 cents per share, from 77 cents per share a year ago.
Shares in Wesfarmers fell 22 cents to $43.18 on Wednesday.
