Wesfarmers warns of more COVID disruption after first-half profit dives

The Coles (main Wesfarmers brand) logo is seen on a facade of a Coles supermarket in Sydney, Australia, February 20, 2018. REUTERS/Daniel Munoz

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  • H1 most disrupted period since start of pandemic – co
  • Says issues with supply chains, worker shortage to continue
  • Shares drop 4.5%

Feb 17 (Reuters) – Australia’s Wesfarmers Ltd posted a 14.2% drop in first-half profit and warned labor constraints and supply chain disruptions due to the COVID-19 pandemic would persist in the second half, sending its shares more than 4% lower on Thursday.

The retail conglomerate said the December-half was its most disrupted period since the onset of the pandemic as it struggled with higher expenses due to supply chain-led delays and lower availability of workers domestically.

Last month, Wesfarmers flagged that a wave of Omicron infections in the country had reduced physical traffic at its stores, weakening retail trading at its Kmart Group and Officeworks divisions.

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“The group has continued to incur additional costs and experience stock availability impacts as a result of ongoing global supply chain disruptions, elevated team member absenteeism and delays with third party logistics providers,” it said on Thursday.

While Wesfarmers acknowledged retail trading momentum had improved in recent weeks, it warned supply chain disruptions, elevated transport costs and constraints in domestic labor markets would continue in the second half.

Analysts at brokerage Jefferies called the results “negative” because of weak cash flows and a subdued outlook and said they expect “modest share price underperformance”.

The stock fell 4.5% to A$52.47 in early trading, underperforming the broader market (.AXJO), which gained 0.7%.

The company’s first-half net profit after tax from continuing operations dropped to A$1.21 billion ($870.8 million) from A$1.41 billion a year earlier.

The Kmart Group, which made up roughly a third of total revenue in fiscal 2021 and lost about a quarter of its store trading days in the first half, saw its pre-tax earnings tumble 63.4% to A$178 million.

Wesfarmers paid an interim dividend of 80 Australian cents per share, compared with 88 cents last year.

($1 = 1.3895 Australian dollars)

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Reporting by Shashwat Awasthi and Tejaswi Marthi; Editing by Shinjini Ganguli and Sherry Jacob-Phillips

Our Standards: The Thomson Reuters Trust Principles.

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