Bunnings Reports Interim Revenue Growth Of 1.7%

Wesfarmers has published half year results, covering the six months ended 31st December, 2021.

Group Overview

• Solid financial result, despite the most significant disruptions to operating conditions since the onset of COVID – Highlights strength of the portfolio, and capacity of teams to rapidly adjust to meet customer demand 
• Pleasing results from Bunnings and WesCEF, and continued improvement in Industrial and Safety • Kmart Group and Officeworks results significantly impacted by COVID-related disruptions
• Around 34,000 store trading days, almost 20% of total store days, impacted by trading restrictions or closures
• COVID-related costs of c.$80m during the period, around half of which related to team member payments
• Interim, fully-franked dividend of 80 cents per share

Bunnings: Sales and Earnings Overview

• Revenue growth of 1.7% to $9,209m
  – Total store sales growth of 26.1% on a two-year1 basis
  – Solid revenue performance, noting cycling extraordinary revenue growth in 1H21
  – First quarter impacted by government restrictions in many states, strong trading in the second quarter including peak Christmas trading period
  – Growth across all product categories and major trading regions on a two-year1 basis
  – Continued strength in commercial segment across builders, trades and organisations
  – Online penetration of 4.3% for the half, driven by shift to online channels during lockdown 
  
  
• Earnings declined 1.2% to $1,259m
  – Strong EBT growth of 34.2% on a two-year1 basis
  – Additional COVID-19 costs of approximately $40m, relating to additional cleaning, security, PPE and support to team members required to isolate
  – Supply chain constraints resulting in higher costs and margin pressure, partially mitigated by a continued focus on cost control
  – Further investment in data, digital and technology capabilities for long-term growth
  – Favourable property disposal outcomes 
  
  
• Return on capital of 79.0%
  – Ongoing investment to expand and upgrade the network
  – Disciplined working capital management

Bunnings Progress on Strategy

• Strengthen the core 
  – Relentless focus on delivering value to customers through lowest prices, widest range and best experience
  – Maintained strong stock levels and availability
  – Safety, community and renewable energy initiatives
  – Range reviews to refresh, expand and innovate products and in-store merchandising
  
  
• Development of the digital agenda
  – Enabled Click & Collect and Click & Deliver for trade segment through launch of new commercial website
  – Improved product search performance and online range, with 110,000 SKUs available
  – Launched Flybuys for retail customers and further developed data and analytics capabilities
  
  
• Commercial growth 
  – Building stronger relationships, ease of shop and expertise with new trade desk formats, trade specialists, sales support and account managers
  – Roll-out of four new Tool Kit Depot stores in WA
  – Completion of Beaumont Tiles acquisition in November 2021

Bunnings Outlook

• Operating environment remains uncertain
  – Recent COVID-19 cases impacting consumer spending and team absenteeism
  – Expect continued COVID-related costs associated with cleaning, PPE and team member support
  – Supply chain constraints and inflationary pressure in some categories expected to continue
  – Expect benefits from customers continuing to spend more time at home and pipeline of residential building activity
  
  
• Remain focused on strategic investments to support long-term growth
  – Lowest price, widest range and best experience
  – Data, digital and technology capabilities
  – Continue to strengthen the commercial offer and expanding the addressable market
  – Two Bunnings warehouses, two smaller format stores, three trade centres and three Tool Kit Depot stores expected to be opened in 2H22

Wesfarmers Limited has reported a statutory net profit after tax (NPAT) of $1,213 million for the half-year ended 31 December 2021. Excluding significant items, NPAT declined 14.2 per cent for the half. Wesfarmers Managing Director Rob Scott said that the solid financial result delivered in such a disruptive environment highlights the strength of the Wesfarmers portfolio, and the capacity of divisional teams to adjust rapidly to meet customer demand.

“The first half of the 2022 financial year was the most disrupted period for our businesses since the onset of COVID-19, with extended government-mandated store closures and trading restrictions in Australia and New Zealand. The Group also made significant investments in the half to support our team members, through payroll support and assistance programs, to help manage the significant personal impacts from extended lockdowns.

“The Group’s financial performance was supported by pleasing results from Bunnings and Wesfarmers Chemicals, Energy and Fertilisers (WesCEF),” Mr Scott said.

“Bunnings continued to demonstrate the resilience of its operating model and ability to meet its customers’ needs in a difficult operating environment, delivering sales growth for the half, despite significant disruptions, temporary store closures and the cycling of very strong demand in the prior corresponding period.

“Strong earnings growth at WesCEF reflected a solid operating performance and higher commodity prices, particularly for LPG and ammonia. It was also pleasing to report continued improvement in the performance of Industrial and Safety.

“Relative to the Group’s other divisions, Kmart Group and Officeworks results were more significantly impacted by COVID-related disruptions during the half. Kmart Group in particular was affected by temporary store closures between July and October 2021.

“Across the Group’s retail businesses there were around 34,000 store trading days impacted by trading restrictions, representing almost 20 per cent of total store trading days for the half. This included more than 20,000 store days for which stores were completely closed to customers. In addition, operating costs and stock availability were impacted by ongoing supply chain disruptions and elevated team member absenteeism.

“Wesfarmers accelerated its investment to develop a market-leading data and digital ecosystem during the half, and good progress was made to build the strong foundations necessary for this initiative to deliver great value, convenience and experiences to customers across the Group,” Mr Scott said.

“This included investment in the shared data asset and scalable customer data architecture as well as the continued development of capabilities within the Advanced Analytics Centre, specialist technical expertise and robust data governance.

“Nicole Sheffield was appointed to the Wesfarmers Leadership Team as Managing Director of a new data and digital division, responsible for capabilities and businesses that support the Group’s data and digital ecosystem agenda. This includes the Advanced Analytics Centre, the Group data asset, and the development of a new subscription program, OnePass.

“Earlier this month, the Club Catch subscription program was rebranded and repositioned as a new program named OnePass, at a reduced monthly fee of $4 or annual price of $40. Subscribers will continue to enjoy free delivery on eligible items purchased from Catch, exclusive deals and OnePass-only pricing. This program will form the basis of a broader subscription program with opportunities to provide even greater value and convenience to customers across the Group. Work is underway on a broader set of benefits that will be available to OnePass subscribers when shopping across Wesfarmers’ retail businesses.

“In December 2021, the Group’s partnership with Flybuys was extended to include Bunnings and Officeworks customers, creating a platform with over eight million members and opportunities for points to be earned on over 120 million transactions each month. Flybuys’ operating model was also updated to provide greater flexibility and value to Wesfarmers and Coles, and to provide more opportunities for Flybuys to deliver value for its members.

“The Group also continued to invest in building platforms for future growth, delivering good progress on the construction of the Mt Holland lithium project, progressing the proposal to acquire Australian Pharmaceutical Industries Limited (API), and further developing Bunnings’ commercial offer with the completion of the Beaumont Tiles acquisition and the expansion of Tool Kit Depot into Western Australia.

“The Group recognises the alignment between long-term shareholder value and progress on key sustainability metrics, and good progress was made on diversity and inclusion, emissions reduction and operational waste during the half."

Source : Bunnings

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