The Covid toll has finally caught up with retail conglomerate Wesfarmers, with the widespread closure of Officeworks and Kmart stores last year and efforts to pay staff during lockdowns weighing heavily.
The $62bn firm had been one of the biggest retail winners of the pandemic until the arrival of the Delta strain last year, with ensuing store closures, supply chain woes and safety requirements sapping its profits and forcing it to slash its payout to shareholders.
Wesfarmers has duly cut its interim payout from 88 cents to 80 cents. This is fully franked and will be paid on March 30.
Investors were clearly unimpressed with Thursday’s interimxjmtzyw earnings release, with the company trading down 4 per cent to $52.74 on the ASX after 15 minutes.
The blow to the Kmart and Target division was particularly fierce over the Delta period, with 34,000 lost trading days and an additional $80m in costs, half of which went to keeping its staff paid during extended lockdowns.
Even the company’s flagship business Bunnings Warehouse lost momentum over the six months to December 31; its pre-tax earnings contribution dipping slightly to $1.26bn even as revenue rose.
Wesfarmers management described the half as its most challenging since the pandemic hit Australia’s shores.
“While many practices to manage the ongoing disruptions associated with Covid-19 have become increasingly integrated into the Group’s normal operating processes, extended government-mandated store closures and trading restrictions in Australia and New Zealand meant that the first half of the 2022 financial year was the most disrupted period since the onset of the pandemic,” the company told shareholders.
Revenues flowing into the Perth-based firm remained relatively flat at $17.8bn over the six-month period, but its overall profit took a 12.7 per cent dive to $1.2bn on account of lost trading days, higher safety costs and additional payroll support and assistance programs for staff.
“The Group continued to provide paid pandemic leave to team members and continued to pay all permanent and many casual team members through periods of prolonged lockdown, even where there was no meaningful work for them and when they were required to isolate,” it said.
“This investment, which totalled approximately $37m during the half, provided much-needed certainty to team members and their families and benefited the Group’s businesses as they sought to re-engage teams when restrictions eased.”
The earnings contribution from Wesfarmers’ chemical, energy, and fertiliser division improved by more than a third to $218m thanks to higher gas and ammonia prices, but its retail businesses all slipped backwards.
Earnings across the Kmart Group – which includes Kmart, Target, and catch.com.au – slipped 63.4 per cent to $178m as stores closed and supply chain chaos limited the range of stock on shelves.
Officeworks revenue was up 3.7 per cent to $1.58bn thanks to technology and furniture sales, but earnings dropped 18 per cent to $82m also on account of store closures and disruptions.
Bunnings lifted revenue to $9.2bn, but extra costs of keeping staff and customers safe ate into its bottom line earnings before tax – a drop of 1.2 per cent to $1.26bn.
Wesfarmers is now trading 21.5 per cent down on the record $67.20 price it hit on the ASX back in August.
