Analysis of Wesfarmers Ltd's Retail Businesses Financial Position

This article provides an analysis of the financial position of Wesfarmers Ltd's retail businesses in 2016 and 2017. The analysis includes Coles, Bunnings, Department Stores, and Office Works. The article also includes a snapshot of the annual report of Wesfarmers Ltd.

Wesfarmers Ltd.

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By student name
Professor
University
Date: 25th May 2018.
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CONTENTS:
Introduction...........…………………………………………………………………..........…...3
Analysis.......................………………........................................................................................3
Conclusion.......................………………...................................................................................10
References......................……………….....................................................................................11
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Introduction:
The Wesfarmers Ltd has been Australia’s biggest company that is listed, and has headquarter in
Western Australia. The core objective of the Wesfarmers Limited is to deliver a higher return and satisfy
the shareholders. The annual report of Wesfarmers is a short report and part of the entire subsidiary of
the companies, how it operates, how it performs its activities, and the financial position as of 30 th June
2017. We have presented below the analysis of the financial position of retail businesses of Wesfarmers.
Analysis:
Coles:
In 2017, the revenue of Coles i.e. $39217, was approximately near to the revenue of 2016. However, the
earnings before interest and tax decreased to $1608 million in 2017. The food and liquor earned a
growth in sales of 2% that is regulated by constant investment in value, service and quality. The primary
focus on dealing with good standard of fresh products and better standard of availability has led to
enhancing the in transactions and units in the basis of year to year (Bromwich & Scapens, 2016). The
highlights are:
 Constant investment in good quality, presence, service and value for consumers.
 Lower the cost with deflation in price for 8 years constantly, but no including fresh and tobacco
of 2.2%.
We have attached herewith a snapshot of the key financial indicators of Coles, which shows the position
in 2016 & 2017.
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We can clearly see the impact and changes in the figures of 2016 and 2017 of Coles. Also Coles express
earned a revenue of $6133 million for the year, which is 8.2% less than the last year due to the low fuel
costs. However even after the decrease in the value of fuel transactions, yet the sales of convenience
store enhanced by 4.6% for the entire year. Coles express had target to deliver a leading shop offer, and
a competitive offer of fuel that it manages with the modifications in the conditions of commercial with
its related partner. This retail has its target on the growth of network (Belton, 2017).
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Home Improvements:
In New Zealand and Australia, Bunnings has its target on increasing the growth of the business,
providing a good experience to consumers and expanding its section, and also make the core of the
business relatively stronger. To reach to the top and expand the business to make it a big brand, is the
core field that is inclusive of expanding and exploring of Bunnings ecosystem via online. It means
opening new stores, and introducing more investment in present network. The earnings of the Home
Improvement section has enhanced 17.4% to $13586 million that is derived with the entire contribution
of Bunnings United Kingdom and Ireland, that is bought on 26th February 2016, and stable growth in
New Zealand and Bunnings Australia. The entire revenue (i.e. EBIT) of $1245 million, for this section
became 2.6% more than the previous year. The return on capital employed arrived at 30.3%. Hence the
highlights are:
 The earnings increased to $13.5 billion.
 The EBIT led to growth in $1245 million.
We have attached herewith a snapshot of the key financial indicators herewith for the reference. We
can have a presentation of the comparability by observing the increment and decrement in the financial
data for both the years:
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Department Stores:
This store was set up in February 2016 by combining Kmart and Target. This sector has under its
operations a total of 774 stores in and out Australia and New Zealand and also gives job to around
44000 team members.
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As we can see in the above snapshot, that the earnings from the Department Stores section was $8528
million for the current year, i.e. a clear decrement of 1.4% because of less earnings of Target that was
slightly adjusted by constant increasing growth of Kmart (Alexander, 2016). The Targets revenue were
derived by the redefining of its business, that has impacted the sales because of decreasing the daily low
prices, and a decrement in those events that are no longer profitable, and also by quitting from those
divisions incurring losses (Das, 2017). The revenue of $543 million for this section, has been higher to
97.5% in comparison to the last year, that shows a clear improvement in the performance of Target and
growth in Kmart. If we do not include the reconstruction costs incurred in Target in the present as well
as previous year, the entire for this business has enhanced to 32.4%.
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Office Works:
The office works inaugurated its very beginning store in Richmond in 1994, and have grown to such an
extent, that it has been named as Australia’s leading retailer as well as suppliers of office related
products and solutions. It acts as definitely a one-stop shop, providing services and help to all the micro,
small and medium size businesses, the students and residents. The highlights are:
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 The considerable growth in sales has increased in both the store as well as online perspective.
 It has led to enhancing the earnings to 7.5% i.e. $144 million.
 The return on capital has grown to 14.7%.
We have attached herewith a snapshot of the key financial indicators for the 2016 and 2017 years:
The earnings of the division office works has grown to 6.1% i.e. $1964 million. The income of $144
million were in total 7.5% higher in comparison to previous year. The planning strategy of Officeworks
known as “every channel”, has been continuing to produce consumers by increasing sales, and also
growth in and out stores and via digitalised. This increase in revenue and earnings was derived by the
design of stores and the modifications of designs, new products and their expansion in the ranges of
products and constant growth to the offer digitally. Effective increase in sales, efficient control in cost,
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and proper mannered capital management resulted in enhancement in cost of capital in 121 basis points
i.e. 14.7%.
Conclusion:
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On the basis of above analysis, we can have a proper understanding of the financial position of the
retail business of Wesfarmers Ltd. with respect to 2016 and 2017. We have also shown a snapshot
of the annual report as of 2017, of Wesfarmers Ltd with the help of extraction of the only the retail
businesses financial status.
References
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Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher Education, 71(4), 411-
431.
Belton, P. (2017). Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat
International ltd. Retrieved from https://www.routledge.com/Competitive-Strategy-Creating-
and-Sustaining-Superior-Performance/Belton/p/book/9781912128808
Bromwich, M., & Scapens, R. (2016). Management Accounting Research: 25 years on. Management
Accounting Research, 31, 1-9. Retrieved from https://doi.org/10.1016/j.mar.2016.03.002
Das, P. (2017). Financing Pattern and Utilization of Fixed Assets - A Study. Asian Journal of Social Science
Studies, 2(2), 10-17.
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