Wesfarmers to Pay Investors $1 Billion as Bunnings Soars

Wesfarmers Ltd, Asia’s largest listed retailer, said it would pay shareholders A$1.1 billion in cash…

Wesfarmers Ltd, Asia’s largest listed retailer, said it would pay shareholders A$1.1 billion in cash as a measure of sales at its Bunnings hardware chain rose at the fastest pace in more than four years.

Wesfarmers will give investors A$1 per share, the Perth-based company said in a regulatory statement today as it announced a 19-per-cent increase in full-year profits. Net income in the 12 months ended June was A$2.69 billion from A$2.26 billion a year earlier.

Sales at Bunnings and Coles supermarkets, which account for about 75 per cent of the company’s annual revenue, are helping the group ride out writedowns and charges at its liquor and department store networks, as well as weakness in its coal and chemicals units as a mining investment boom in Australia slows. The cash return, Wesfarmers’ second in 12 months, indicates the dearth of investment opportunities seen by the company, which carried out Australia’s biggest takeover with its A$18 billion acquisition of Coles Group Ltd in 2007.

Capital Return

Wesfarmers paid A$585 million to shareholders during the first half of the year through a 50 cents-per-share capital return announced last year.

The value of the latest distribution is just ahead of the one-time gain of A$1.04 billion during the year Wesfarmers received from selling off its insurance businesses.

Sales from Bunnings stores open at least 12 months rose 10 per cent in the fourth quarter, the fastest pace of growth at the chain since at least the three months ended March 2010.

Unemployment, Inflation

Wesfarmers has been navigating shaky consumer sentiment that’s been negative for six consecutive months and rose to its highest level since April this month.

Australia’s misery index - the sum of unemployment and inflation rates - rose to its highest level since 2008 this month as jobless rates hit a 12-year high with central bank rates at a record low.

Full-year revenue was A$62.35 billion, up 4 per cent from a year earlier, while earnings before interest and tax fell 16 per cent to A$2.89 billion after excluding A$1.26 billion of Ebit from units that were sold during the year.

At Coles supermarkets, sales gained 4.6 per cent to A$37.39 billion over the year, and climbed 4.1 per cent in the fourth quarter in food and liquor stores open at least 12 months. That was the fastest pace of growth since the same quarter last year, according to data compiled by Bloomberg.

“The Coles turnaround has more growth than previously expected,” Shaun Cousins, an analyst at JPMorgan Chase & Co. in Sydney, wrote in a note to clients last month. Australia’s consumers are showing “increasing confidence,” he wrote, improving the outlook for the country’s retail industry.

Full-year group Ebit rose 8.3 per cent at the Bunnings hardware chain and climbed 6.4 per cent at the Kmart discount department store. Ebit declined 37 per cent at the mid-range Target chain.