By Archishma Iyer and Byron Kaye
(Reuters) -Australian conglomerate Wesfarmers Ltd said annual profit rose 4.8%, just ahead of analyst forecasts, as elevated living costs sent new shoppers to its budget department store chain Kmart, offsetting the impact of a renovation slowdown on its hardware unit.
The result shows the benefit of diversification at the country's biggest listed conglomerate which also owns pharmacies, an office supplies chain, an industrial chemicals business and a lithium mine that is scheduled to start making sales next year.
For years the Perth-headquartered firm has grown most of its profit by riding a property and renovation boom at market-dominating hardware chain Bunnings. On Friday it said the chain's profit grew just 1.2% in the year to June as shoppers showed "more caution in making big-ticket purchases and commencing larger DIY projects".
Its Kmart unit, which is unrelated to the U.S. chain, meanwhile grew profit by more than half as it shook off a period marked by COVID-19 trading restrictions and attracted cost-conscious shoppers amid a living cost squeeze.
"As people become more value conscious, and also as the quality of Kmart's quality improves, we're attracting a lot of new shoppers," said Wesfarmers CEO Rob Scott on a media call.
"People are increasingly buying their clothes at Kmart where previously they might have only been buying their home products."
Total profit of A$2.47 billion came in just above the average analyst forecast of A$2.45 billion, according to data aggregator Visible Alpha.
Wesfarmers shares were up 2.5% in early trading, against a 1% decline on the broader market, as analysts cheered a better-than-expected result from a company seen as exposed to changing consumption patterns.
The result was "inline and could be seen as better than feared", Macquarie Group (OTC:MQBKY) analysts said in a client note. "Seems like consumer drag marginal."
Wesfarmers said it expected to generate its first earnings from a new lithium business in the first half of calendar 2024 with offtake agreements "well progressed".
The company declared a final dividend of A$1.03 per share, taking total dividends for the year to A$1.91, up from A$1.80 the previous year.
($1 = 1.5584 Australian dollars)