SYDNEY (Reuters) - Australian conglomerate Wesfarmers Ltd defied a retail downturn to post rising half-year sales and wider margins at its hardware stores on Thursday, sending its shares to a four-month high.
Retailers had their worst quarter in a year in December, official statistics showed, as a property downturn hit consumer confidence and earnings at companies from grocers to mechanics.
But Wesfarmers shone through the gloom with a 10.4 percent rise in profit for the six-months ended Dec. 31 to A$1.08 billion ($774 million). Revenue from continuing operations rose 4.2 percent to A$14.39 billion.
The company declared an interim dividend of A$1.00 per share and a special dividend of A$1.00 per share as it distributed the spoils of asset sales in the biggest reshuffle of its portfolio in a decade.
The result was driven by its hardware and stationary divisions, vindicating its decision to divest its slow-growth grocer, Coles Group Ltd.
"In the middle of a great retail downturn, as we're constantly told, this is what resilience looks like," said David Walker, an analyst at Clime Asset Management, which owns Wesfarmers shares.
Wesfarmers shares rose 6.6 percent by midsession to their highest since October, while the broader market rose 0.3 percent.
The engine-room for growth was domestic hardware, where revenue climbed 5.2 percent to A$6.91 billion and margins ticked up three basis points.
To be sure, soft conditions dragged hardware earnings growth to its slowest pace in six years, and the firm said it did not expect trading conditions to improve in the second half.
But hardware income was enough to offset a fall in discount department store earnings, where the company had previously warned of a slowdown.
"When consumers are being a bit more cautions on their spending, you often find they might not travel as much or go on that overseas or interstate holiday," Wesfarmers Managing Director Rob Scott said on a conference call.
"But they'll stick around the house and when they stick around the house they invariably do more work around the house," he said, adding that commercial hardware sales to tradesmen also grew strongly in the half.
On a statutory basis, Wesfarmers reported a record net profit of A$4.54 billion, significantly higher than the A$212 million reported a year ago as it benefited from selling businesses from car repairs to coal mines.
Wesfarmers spun out Coles, Australia's biggest supermarket chain, in November after a decade of ownership in order to chase higher returns elsewhere.
Coles reported a 14 percent fall in profit on Tuesday and said it would need a new strategy to address slowing sales and rising costs.
"Once again the company has demonstrated an ability to read the tea leaves with its asset sales," said James McGlew, executive director of corporate stockbroking at Argonaut Ltd.
(Reporting by Tom Westbrook in Sydney; Additional reporting by Aditya Soni in Bengaluru; Editing by Stephen Coates)
