Wesfarmers (ASX: WES) continues to shoulder covid-related baggage, now expecting first half profits for FY22 to slide -10.8% to -15.1% compared to the previous period.
Encouragingly, Wesfarmers said that the result is “in line with current consensus expectations” and the company’s stock managed to open 2% higher.
The Group’s first half performance was supported by an upbeat performance from Bunnings and its Chemicals, Energy & Fertilisers business which was offset by its Kmart Group and Officeworks.
To add some perspective, the breakdown for Wesfarmers' divisional FY21 sales performance was:
Bunnings: 49.7%
Kmart Group (incl Target): 29.4%
Officeworks: 8.9%
Chemicals, Energy and Fertilisers: 6.3%
Other: 5.7%
Kmart and Target sales declined -10.3% for the first half, as almost 25% of store trading days were lost due to lockdown requirements.
Wesfarmers expects combined earnings for Kmart and Target to be between $215m and $223m for the first half.
By comparison, the two businesses delivered a combined $502m in the previous period.
The sharp decline in earnings reflected elevated costs due to ongoing supply chain disruptions, holding additional stock and commitments to pay staff members during lockdowns.
Before today’s bounce, Wesfarmers shares had already fallen -8.9% year-to-date, trading near 9-month lows.
The share price might have already 'priced in' much of the omicron-related damage.
Wesfarmers also said that its weaker earnings was "in line with current consensus expectations".
With no surprises and a beaten up share price, Wesfarmers seems to have nowhere to go except up.
Wesfarmers said that customer traffic to stores has “remained subdued during the first half of January”.
Covid-related issues are expected to persist due to team member absenteeism due to covid infection and supply-side related issues.
Brokers are likely busy digesting the news and will provide updated share price targets tomorrow.
As it stands, consensus views the stock as a Hold with a $58.39 target price (6.8% upside).
Today's announcement was an update in relation to the group’s preliminary profit result for the half-year ended 31 December 2021.
Wesfarmers is expected to announce its half-year FY22 earnings on Thursday, 17 February.
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