The West

Wesfarmers to take hit on Target

UPDATE 2.45pm: Wesfarmers has revealed a further profit deterioration at its Target business while taking a major write-off against the ailing discount department store chain.

Wesfarmers said today it would take a $680 million pre-tax impairment charge in its upcoming annual results against the goodwill associated with Target, which was purchased along with other Coles Group businesses in 2007.

The charge took account of Target's expected earnings before interest and tax of $82 million to $88 million for the2013-14 financial year. The forecast compares to the $136 million profit posted by Target for the previous year and represents a sharp second half deterioration given first half profit of $70 million.

Wesfarmers has previously warned that a recovery plan implemented under Target chief executive Stuart Machin would affect the chain's short-term performance.

"Notwithstanding the revision to Target's carrying value, we are pleased with the progress that has been made over the past 12 months in materially strengthening Target's leadership team," Wesfarmers chief executive Richard Goyder said today.

He added the group saw "many opportunities to significantly improve Target's performance".

After also accounting for a $94 million provision related to the restructuring of its under-performing liquor business, Wesfarmers said it expected to book a pre-tax profit of $261 million to $301 million in so-called non trading items.

The charges offset a $1 billion profit booked on the sale of the group's insurance underwriting and broking businesses.

Wesfarmers emphasised that the value created on the other Coles Group businesses, notably the supermarket operations, "significantly exceeds" the Target charge.

Investors seemed to take the writedown in their stride, sending Wesfarmers shares up $1.14 cents, or 2.75 per cent, to $42.66 at the close.

The West Australian

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