Wesfarmers
Recommendation
Wesfarmers has reported a good-looking set of second-quarter sales numbers, but they obviously weren't quite up to snuff as the shares have opened around 1% lower.
The main highlight was Coles, which saw comparable food and liquor sales growth of 3.9% – its fifteenth consecutive quarter of growth and its highest for five quarters. The improvement reflected higher volumes and a reduction in grocery price deflation to 0.9%.
Other positives were a 4.2% rise in Bunning's same-store sales, compared to market forecasts of about 3%, and a return to growth for Target (albeit only 0.2% on a comparable basis).
Wesfarmers also announced a 2% rise in average US$ coal prices for the March quarter. However, due to a scheduled mine shutdown in December and the use of lower yielding feed stocks, December quarter coal production fell 6.4% from the previous quarter. Due to the same factors, as well as lower demand from North Asian customers and recent flooding, the company downgraded its coal sales volume forecast for the 2013 financial year to 7.5 to 8.0 million tonnes.
The stock is up 9% since our last review on 28 Nov 12 (Hold – $35.16). HOLD.