Wesfarmers Plans A$579 Million Capital Return as Earnings Rise

Wesfarmers Ltd. (WES), Australia’s largest employer, announced a A$579 million ($530 million) capital return to shareholders as earnings rose 6 percent amid a supermarket discounting drive.

Net income rose to A$2.26 billion in the 12 months ended June 30 from A$2.13 billion a year earlier, the country’s second-largest retailer said in a regulatory statement. That was in line with the A$2.27 billion average of eight analyst estimates compiled by Bloomberg.

Wesfarmers has cut the prices on staples including bread and milk to win customers as it attempts to turn around its Coles supermarkets, which it bought alongside the Target, Kmart, and Officeworks chains in a A$19.6 billion takeover in 2007. Sales from Coles stores open at least 12 months have grown faster than those from Woolworths’ supermarket division for at least 14 consecutive quarters, according to data compiled by Bloomberg News.

“The next two to three years will be very positive for Wesfarmers shareholders,” David Errington, an analyst at Bank of America Corp.’s Merrill Lynch unit, wrote in a July 31 note to clients. The company has a “very cash rich generating business, combined with a balance sheet that looks to be near an excess capital position,” he wrote.

The Perth-based company said it will make a capital return of 50 cents per share, representing 1.2 percent of its stock, according to a separate regulatory statement. Wesfarmers shares rose 2.4 percent to A$42.93 at 11:08 a.m. in Sydney, marking a 16.5 percent gain this year that’s outpaced the 11 percent improvement in the benchmark S&P/ASX 200 index.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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