Office supply retailer Officeworks saw earnings fall 18 per cent to $82 million, which the company attributed to higher costs incurred amid an influx of lower-margin online orders through the half. Online sales across all of Wesfarmers’ divisions grew 37.5 per cent to $1.9 billion.

Not even home improvement chain Bunnings, Wesfarmers’ standout performer, was immune to the torrid trading conditions, with earnings falling 1.2 per cent to $1.26 billion, again due to higher costs from staff payments and supply chain issues, marking the first time in a decade that Bunnings’ earnings have fallen in a December half.

‘Lower quality’ result

This drop in earnings at the company’s best-performing division worried analysts, who labelled the result as lukewarm and raised concerns about Wesfarmers’ higher inventory level and the prospect of lower profit margins for the remainder of the year.

“We are concerned that higher inventory balances will constrain Kmart’s margin recovery, while Bunnings should see a modest decline in margins,” MST Marquee analyst Craig Woolford said.

Barrenjoey analyst Tom Kierath said the result was “lower quality” and also highlighted the company’s higher costs.

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In total, Wesfarmers bore around $80 million of additional costs due to COVID-related cleaning measures and staffing expenses, with the company committing to pay employees even when they were unable to work due to lockdowns.

Mr Scott said the second half of fiscal 2022 had initially started slow due to Omicron fears through January, however he was optimistic for the rest of the financial year.

“We’ve started to see improvements in sales, improvements in confidence and a sense of optimism across most of Australia,” he said. “So we feel quite positive about the outlook for our businesses and for the economy.”

Despite this, Wesfarmers still expects supply chain issues to continue to weigh on the business for the remainder of the financial year.

The company declared an interim dividend of 80 cents a share, payable March 30, down slightly on last year’s 88 cent dividend.

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