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Itâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s one of the most well-known and high profile advertising slogans from one of Australiaâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s most loved retailers âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ but not for much longer.

Bunnings is quietly pulling the pin on its famous tagline.


âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Lowest prices are just the beginning âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¦ÃƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ is, well, ending. At least for now



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Wesfarmers is taking advantage of record highs in the Coles share price and generally buoyant conditions in equity markets to sell off $1.1bn of its stake in Coles, representing one third of its total holding, marking the next step in its demerger and eventual sell down of its holding in the supermarket group.


After the market closed on Tuesday, and following the release of Colesâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ first half results, Wesfarmers announced it had entered into an underwriting agreement with two lead managers to sell 4.9 per cent of the issued capital of Coles. It is using the services of UBS and Macquarie Bank for the sale.


Wesfarmers, whose directors are currently in a board meeting before the release of its half-year results on Wednesday, is looking for prices between $16.08 and $16.45 as it aims to sell 65.4m shares in Coles to investors.


Following the sale process, Wesfarmers will retain a minority interest of 10.1 per cent in Coles and its right to nominate a director on the Coles board, maintaining the ongoing relationship between the two companies since the demerger of Coles from Wesfarmers in November 2018.


The sell down comes as Wesfarmers managing director Rob Scott is continuing to reshape Wesfarmers, which has seen him in the past few years generate billions of dollars in revenue from the sale of its Bengalla coal mine, the sale of Kmary Tyre and Auto as well as the sale of Quadrant Energy.


Wesfarmers demerged Coles supermarkets in 2018 and the selldown has been widely expected in recent days.


Under the relationship deed agreed with Coles at the time of the demerger, Wesfarmers has the right to nominate a director to the Coles board while it retains an interest in Coles of at least 10 per cent.


It comes as Coles shares trade near all-time highs and have risen almost 50 per cent in the last year.


Mr Scott said the partial sale of the Coles shareholding would crystallise a strong return for shareholders while enabling continued strategic alignment and collaboration between the two companies in relation to mutually beneficial growth initiatives.


âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“We believe this level of divestment is in the best interests of our shareholders and consistent with our objectives at the time of the demerger, which included demonstrating continued confidence in Colesâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ future as a stand-alone listed company,âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ Mr Scott said. âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“We have been pleased with the performance of Coles as an independently listed entity and believe it is an appropriate time to realise value for our shareholders while retaining a meaningful interest and ongoing connection with Coles, including representation on its board and through our flybuys joint venture.âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ÂÂ


Bids are to close at 7pm on Tuesday.

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What are the malls and supermarkets even doing open in the face of this pandemic?


WES dropping the ball when it comes to it's social responsibility. Must be waiting for the orders to come through from head office.


While we're on it, when are the buses and ferries and trains going to be stood down? Once all the major office blocks, schools and universities are shut they won't be needed.

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iWesfsrmers s selling a $1.1 billion stake in supermarkets group Coles in a trade being handled by UBS and Goldman Sachs on Monday night, sources told Street Talk.


The brokers bought the stake at $15.39 a share after market on Monday and were seeking institutional buyers to take the stock.


The deal was at an 8.5 per cent discount to the last close and represented 69.4 million shares or 5.2 per cent of Coles' equity on issue.


- now holding under 10% ...., give up the director seat. Keeping 50% of Flybuys

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Wesfarmers chief executive Rob Scott said the conglomerateâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s hardware chain Bunnings started from scratch with an online shopping platform just two years ago but was now âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“leading the wayâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ in retail as customers gravitate to online in the wake of the coronavirus pandemic.


Following the demerger of Coles, Bunnings now generates just more than 50 per cent of Wesfarmersâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ annual earnings and with the deteriorating performance of the conglomerateâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s general merchandise chain Target and its industrials and safety divisions, the hardware chainâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s contribution to profit is set to grow.


Mr Scott said Bunnings was leading the way in its roll out of online shopping. âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Kmart and Target âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¦ achieved very strong growth in online sales and if I look at Bunnings, it is worth remembering that two years ago Bunnings didnâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢t have an online transactional capability and now in many ways I think Bunnings is leading the way around innovation in this area,âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ Mr Scott told a Macquarie conference. âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“The drive and collect model has been a fantastic initiative that has been adopted by Bunnings and Officeworks which essentially allows a customer to drive their car to a Bunnings warehouse store and one of our team members will drop the order off at the back of the boot.âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ Wesfarmers had also converted three Kmart stores to âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“dark storesâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ (distribution centres) to help support the lift in online demand. âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“It is worth noting that we have been able to win a number of new customers through this, so we are seeing that this is driving incremental sales and incremental customers to our business, not just cannibalising sales that would otherwise occur in the store.âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢




Wesfarmers was also learning new digital skills from its recent acquisition of Catch.âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“We have seen very strong growth in sales in the Catch marketplace and we have also learnt a lot about the digital experience within the Catch business that we have been able to roll out in some of our other businesses,âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ he said. Wesfarmers, which is sitting on more than $2bn in cash following the partial sell down of its stake in Coles, would look to invest in online. âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“In terms of online investment we will very much be led by the divisions, and by the customer I guess, in how much we spend and how quickly we spend, we are seeing some great opportunities to invest in the digital space. âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Interestingly, because a lot of software is cloud-based solutions, the upfront costs associated with a number of these are materially lower than they were five to 10 years ago. So a lot of the investment we are making is more opex (operational) than capex (capital) and you can get quite a lot of bang for your buck in terms of the investment you make.âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ Mr Scott said he expected more significant online investments to be made in its Bunnings, Kmart and Catch businesses.

Turning to trading, Mr Scott said âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“I would be very surprised, I think it will be unlikely to see the strong growth in sales that we have experienced in the last couple of months to continue. It would be great if they did, but I think realistically we would expect some moderation."

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In a trading update on Tuesday, Wesfarmers said sales atBunnings had risen 19.2 per cent in the June-half to date, after 5.8 per cent growth in the December-half, lifting sales so far this year by 11.3 per cent. Officeworks sales have risen 27.8 per cent in the June-half, following 11.5 per cent growth in the December half, lifting year-to-date sales by 19.3 per cent.


At online retailer Catch Group, acquired a year ago, gross transaction values soared 68.7 per cent in the June-half, up from 21.4 per cent growth in the December-half, lifting sales so far this year by 43.7 per cent. Wesfarmers' total e-commerce sales, across all divisions, rose 89 per cent as consumers ordered online to avoid the shops.


However, the strong sales growth will not flow straight through to the bottom line. More than $20mill spent on cleaning, security and protective equioment, plus $70mill down from total closure of NZ Bunnings stores

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Is Wesfarmers heading to a sales cliff?



Yes and no.

Sales growth has come at a cost. [A broker] points out the incremental margin on the latest sales is 14.5%, lower than what would normally be expected with such strong growth. The broker expects this situation will continue in the second half.


Costs were higher at Bunnings, as around $20m was invested in cleaning, security and protective equipment over the past three months....

Every business has carried these costs. Is the advantage WES gained now grafted in, is a better question. And supply line reliance, with related reliability, on Chinese product is lurking. Saved by a stronger AUD, is one bit of upside for margins.

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Wesfarmers reported a 7.4 per cent increase in underlying net profit from continuing operations to $2.08 billion as strong profit growth at Bunnings and Officeworks offset weaker earnings from Target and the industrials businesses.


Wesfarmers slashed the value of Target by $525 million, or $437 million after tax, and booked $110 million or $83 million net in restructuring costs. It also booked a $310 million impairment ($298 million net) against the value of the industrial and safety businesses. These large one off items were partly offset by a $290 million gain on the sale of a 10.1 per cent stake in Coles and a $220 million revaluation of its remaining 5 per cent stake.


Revenues grew 10.5 per cent to $30.85 billion, beating consensus of $30.3 billion, underpinned by strong sales growth at Bunnings, Kmart, Officeworks and online retailer Catch Group. Bunnings and Officeworks sales soared as consumers forced to spend more time at home stocked up on home office equipment, educational needs, and hardware and gardening supplies, while Catch has benefited from the acceleration in online spending during the pandemic.


Bunnings profits rose 13.9 per cent to $1.8 billion, and Officeworks profits were up 13.8 per cent to $190 million, but Kmart Group profits fell 23.5 per cent to $413 million despite the Catch acquisition. Kmart delivered solid sales growth of 5.4 per cent despite volatile trading conditions, but Target sales fell 2.6 per cent.

In the chemicals, energy and fertilisers business, earnings fell 9.2 per cent to $393 million, while industrial and safety profits plunged 53.5 per cent to $40 million.


Online sales across the group rose 60 per cent to $1.5 billion, or $2.1 billion including Catch, which is part of the Kmart Group.


Plans were announced in May to close between 10 to 25 large format Target stores, convert between 10 and 40 large format stores into Kmart, swap 52 Target Country stores to small format Kmart stores, and significantly reduce Target store support office staff.


Wesfarmers kept most of its retail stores open during the first national lockdown in April and May, when strong demand for hardware, homewares and home office equipment boosted sales. However, Kmart and Target have been forced to close in Melbourne during stage 4 restrictions and Bunnings and Officeworks are open to trade customers only for six weeks, forcing the retailers to rely on online operations to generate sales.


Wesfarmers did not receive material Australian government support payments and is not currently part of the JobKeeper program. One small entity was eligible for JobKeeper but this application was withdrawn. Wesfarmers received approximately $40 million in wage subsidies outside of Australia, almost entirely in New Zealand, where it was forced to temporarily close Bunnings stores to the public.



Wesfarmers will also pay a final dividend of 77¢ a share, plus a special 18c dividend arising from the sale of the 10.1% share of Coles.

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