Wesfarmers Ltd., Australia’s largest retailer, posted annual earnings that matched analyst estimates as discounting and a move to more own-brand goods helped fend off competition from German discount supermarket Aldi.
Net income was A$2.44 billion ($1.79 billion) in the 12 months ended June 30, the Perth, Western Australia-based company said in a regulatory statement Thursday. That’s a fall of 9.3 percent from the A$2.69 billion result a year earlier, and was in line with the A$2.42 billion average of 10 analyst estimates compiled by Bloomberg.
The result demonstrates the ongoing challenges for Managing Director Richard Goyder, who’s more than tripled Wesfarmers’ enterprise value since taking the top job in July 2005. He’s facing competition on multiple fronts from incoming discounters Aldi and Costco Wholesale Corp., and domestic market-leader Woolworths Ltd., which is firing 1,200 workers and ploughing A$500 million into discounting key lines.
“They’re doing all the things that have been effective in competing with discounters in Europe,” Andrew McLennan, an analyst at Commonwealth Bank of Australia in Sydney, said by phone before the results.
Wesfarmers shares rose 1.7 percent to A$41.05 at 10:22 a.m. in Sydney, paring this year’s decline to 1.6 percent.
Aldi’s expansion is driving “a number of headwinds that are undermining the historically stable structure of Australia’s grocery retail market,” Ian Chitterer, a Sydney-based Moody’s Investors Service analyst, wrote in an Aug. 13 report.
Coles is Australia’s second-largest supermarket after Woolworths’ eponymous grocer. Wesfarmers also owns the country’s leading hardware chain Bunnings and its largest department store by outlets Target, as well as chemical plants, coal mines, an overalls-maker, and stakes in an investment bank and a sawmill.
Earnings before interest and tax from Coles rose 6.6 percent to A$1.8 billion, while those from Bunnings improved 12 percent to A$1.2 billion.
Ebit gained 18 percent at Kmart discount supermarkets and climbed 4.7 percent at the mid-range Target chain.