Wesfarmers’ Shooting Stars Continue to Deliver, but Coles’ Decline in Profitability Surprised
Narrow-moat-rated Wesfarmers announced underlying net profit after tax of 2.9 billion in fiscal 2017, an increase of 22% on the previous year. The result was broadly in line with our estimate, although Coles’ performance disappointed. We maintain our AUD 39 per share fair value estimate, with shares currently screening as slightly overvalued.While we expected food margins at Coles to decrease, the magnitude of the EBIT margin compression surprised us on the downside. Coles’ EBIT decreased by 14...
Wesfarmers is engaged in the retailing operations including supermarkets, merchandise and department stores, fuel, liquor and convenience outlets; retailing of home improvement and outdoor living products and supply of building materials; retailing of office and technology products; coal mining and production; gas processing and distribution; industrial and safety product distribution; and chemicals and fertilisers manufacture; and investments. Co.'s retail operations includes Coles, which operates Coles Supermarkets, Coles Express, Liquorland, Vintage Cellars, First Choice Liquor, and Spirit Hotels, among others; while its departmental operations include Kmart and Target retailers.
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