Wesfarmers says its retail businesses, especially supermarket giant Coles, is driving the company’s growth as it reiterated its positive outlook for 2013.
Wesfarmers chief executive Richard Goyder told the company’s annual general meeting in Perth on Wednesday that the company’s expected performance this financial year was in line with the outlook provided at its full year results in August.
Wesfarmers’ insurance and retail businesses, which include Coles, Target and Bunnings, have experienced a good start to 2012/13.
The company made a profit of $2.1 billion for the year to June 30, an 11 per cent increase on the $1.9 billion from the previous year.
“Our retail businesses continue to achieve good transaction growth and provide better value for customers, while our insurance business has to date benefited from improved underwriting performance and lower claims experience,” he said.
Coles had performed particularly well during the start of the year, with 3.7 per cent comparative sales growth for food and liquor and 0.4 per cent comparative growth in fuel volumes at Coles Express.
“Growth in these businesses has also continued into the second quarter of this year,” Mr Goyder said.
“We now have approximately two million more customers visiting our stores each week than we had in 2007, reflecting the continued improvements in quality, service and value.”
Target had also experienced growth in transactions and customers during the second quarter, which Mr Goyder said instilled confidence that the early stages of the department store’s turnaround was working.
Kmart was continuing to focus on low prices and customer value and the roll out of its planned expansion.
Mr Goyder said Wesfarmers was hopeful its retail businesses would benefit from stronger trading conditions for Christmas.
“We are hopeful for a positive trading outcome in the retail businesses during the important Christmas period,” he said.
The insurance division benefited from an improvement in premium rates, risk selection and underwriting in Australia and New Zealand.
Wesfarmers’ resources division was facing a difficult metallurgical coal market and Mr Goyder said the company was focusing on optimising operations and reducing costs.
He said the increase in state royalties and the introduction of the carbon tax would affect the resources division’s performance in the 2013 financial year.
The industrial and safety division was experiencing some slowdown across its markets, particularly in coal mining and iron ore.
Chairman Bob Every defended the $14.8 million paid to Coles chief executive Ian McLeod for 2011/12, as it was part of a five-year arrangement to turn around the supermarket chain that the company bought in 2008.
“He’s undertaken an enormous business task in turning around a broken business,” Mr Every said.
Mr Goyder responded to criticism from the Transport Workers Union (TWU) that Coles was jeopardising the safety of truck drivers by not paying them enough.
“The reality is of the 330 people killed on the roads in truck crashes last year, zero had anything to do with Coles,” he said.
