Wesfarmers H1 has Kmart, Target setback

Shoppers at a Kmart store.
Wesfarmers has reported likely first-half earnings in a trading period beset by COVID-19 challenges. -AAP Image

Wesfarmers is on course for first-half earnings which will satisfy investors but the coronavirus pandemic has crippled Kmart and Target.

The group on Monday reported first-half net profit after tax should fall between $1.18 billion and $1.24 billion, which would meet investors' expectations. The earnings are due to be revealed on February 17.

Wesfarmers said its chemicals operations and Bunnings helped earnings but flagged significant impact on Kmart and Target from COVID-19.

The department stores' sales for the six months to December 31 were down 10.3 per cent due to temporary closures and restrictions brought on by coronavirus.

Almost 25 per cent of store trading days were lost due to lockdowns. The department stores were in a greater risk category for virus safety restrictions than Bunnings.

The ACT, NSW and Victoria all had lengthy lockdowns, while there were fewer visitors to stores during the Christmas season due to the Omicron wave.

Another contributor to fewer sales was the closure of 62 Target stores. This mostly happened in the previous financial year, with some converted to become Kmart outlets. 

Kmart and Target were also battling workers being away sick with the virus, and supply-chain difficulties.

The virus has continued to affect sales at the start of the second half of the financial year.

The company said customer traffic to stores in the first two weeks of this year was subdued.

Wesfarmers only detailed the Kmart and Target performance due to the significant change to earnings.

The group's online shopping site, Catch, is forecast to have a first-half earnings loss of between $43 million and $45 million.

There was more spending on staff, technology and marketing to ensure long-term growth.

Investors appeared focused on the likely group earnings however.

Wesfarmers shares on the ASX were up 2.41 per cent to $55.30 at 1341 AEDT.