Retail giant Wesfarmers has joined the list of companies rewarding their shareholders, announcing $2.3 billion in dividends after a solid financial year which saw profits jump 16%.
Wesfarmers’ multi-billion rewards will see the company, which owns Bunnings, Kmart, Target and Officeworks, issue shareholders with a $2-a-share payment in December, on top of the higher dividend.
The company said this payment would reset its capital structure and guarantee a good return for investors.
This will be on top of the 90 cent a share final dividend which will take the full-year payout for Wesfarmers shareholders to a fat $3.78 a share.
Revenue for the year to June rose 10% to $33.9 billion, and net profit after tax jumped 16.2% to $2.4 billion. When stripping out one-off costs such as an impairment on Kmart and the valuation of the company’s investment in Coles, earnings soared 40.2%.
The conglomerate joins rival retailer Woolies which yesterday revealed higher dividends and a $2 billion buyback, as well as companies like BHP, Rio Tinto, Oz Minerals and the big banks, led by the Commonwealth in returning billions of dollars to shareholders via higher or special payouts and/or buybacks.
Coming after the toughest year in living memory for many companies and millions of their employees, thanks to Covid and the lockdowns, the rewards for shareholders to look a touch over the top, especially when it was the support spending (JobKeeper and HomeBuilder for instance) from the Federal and State Governments, as well as the Reserve Bank’s record lower interest rates, cheap loans for the banks and the $5 billion a week of quantitative easing that limited the damage from the lockdowns and helped maintain and then boost consumer and business spending and investment.
Wesfarmers’ key chain Bunnings was a big beneficiary of the lockdown support spending and especially from programs like HomeBuilder which continues to support the construction and home renovation sectors.
Officeworks benefited from the work from home move and the instant write off investment support deal from the Federal Government which boosted sales of home office equipment (and also helped the likes of JB Hi Fi, Apple and Harvey Norman which reports early next week).
If anything, these record buybacks and dividends from companies like Wesfarmers are the recycling of the profits made from this taxpayer support (from government and the RBA) to shareholders and managers (in the form of bonuses in many, but not all cases).
But while the company benefited mightily from the lockdowns in 2020-21, the recent lockdowns are threatening to hit Wesfarmers’ start to the 2021-22 financial year.
Sales at Bunnings are down 4.7% (and it has been forced to close to retail trade in NSW) and trade across Kmart and Target has fallen 14.3%. Online retailer Catch’s gross transaction value has dropped 8.5%. Officeworks, which has been allowed to remain open for much of NSW’s lockdown, only reported a 1.5% dip.
Wesfarmers says this is imposing extra costs, including payroll costs of $2 million to $4 million a week as Wesfarmers continues to pay the wages of all permanent and many casual team members throughout lockdowns.
CEO Rob Scott said impacts of lockdowns had become more acute and any further widespread restrictions would negatively impact the business.
“While COVID-19 had a significant impact on operations during the year, the Group’s businesses maintained their focus on building deeper customer relationships and trust,” Mr Scott said.
“In line with Wesfarmers’ objective of delivering superior and sustainable long-term returns, the businesses continued to invest in providing greater value, quality and convenience for customers, including through strengthened data and digital capabilities.”
