The integration of Kmart and Target stores will take another step with Target to begin selling Anko-branded products early next year.

Cost-conscious consumers have been flocking to Kmart for bargains, propelling its broader business division to record earnings last financial year.

“We’re actually seen an increase in customer numbers within Kmart,” Wesfarmers managing director Rob Scott told reporters on Friday as the retail and industrial conglomerate posted better-than-expected full-year earnings.

“What we’re seeing is that as people become more value conscious, and also as the quality of Kmart’s products improve, we’re actually attracting a lot of new shoppers to Kmart,” Mr Scott said.

Customers that might have only bought home products from Kmart are now purchasing fashion apparel, its Anko-branded activewear and health and beauty products, he said.

For the 2022/23 financial year, Kmart Group – which includes Target stores – grew its revenue 16.5 per cent to $10.6 billion.

Same-store sales rose 14.5 per cent for Kmart and dipped 0.5 per cent for Target, with stronger performance for Target in apparel offset by challenging trading in homes and toys.

Kmart Group’s earnings soared 52.3 per cent to $769 million, a record for the business.

Overall, Wesfarmers – which includes Bunnings, Officeworks and several other divisions – posted a $2.47 billion full-year profit for the 12 months to June 30, up 4.8 per cent from last year.

Revenue grew 18.2 per cent to $43.6 billion, with earnings before interest and tax up 6.3 per cent to $3.7 billion.

E&P Capital retail analyst Phillip Kimber called it a good result for Wesfarmers, with better-than-expected earnings from Bunnings, Kmart Group and WesCEF, its portfolio of chemical, energy and fertiliser businesses.

Bunnings’ revenue was up 4.4 per cent to $18.5 billion, with earnings rising 1.2 per cent to $2.2 billion, as strong demand from commercial customers were partially offset by lower consumer sales.

Consumers were more cautious in the second half about making big-ticket purchases and commencing larger do-it-yourself projects but continued buying necessity and smaller-scale DIY home improvement projects, Wesfarmers said.

Catch, the e-commerce business Wesfarmers acquired in 2019 for $230 million, saw revenue drop 30.6 per cent to $354 million.

It incurred a $163 million loss, up from $88 million the year before.

“When we bought Catch about four years ago, our businesses were at a very different level of maturity around e-commerce, and in the past four years, we’ve seen a fundamental change in the market dynamics around e-commerce,” Mr Scott said.

Wesfarmers‘ brick-and-mortar retail brands generated $1.4 billion in e-commerce sales in 2022/23, about double the level that Catch had, he noted.

“We’ve learnt a lot from Catch, but the reality is that it’s very difficult in today’s market to have a profitable and scalable pure e-commerce retailer.”

Wesfarmers is planning to scale down Catch’s product range to hopefully eventually make it profitable – although the company is still expecting a loss in 2023/24 – while doubling down on the e-commerce capabilities of its other brands.

While Coles this week flagged that it had been the victim of organised shoplifting rings, Mr Scott said that Wesfarmers‘ businesses had only seen stock losses basically return to normal levels following the pandemic.

He was more concerned about a rise in customers abusing staff.

“We’re really focused on the safety of our team – so there are various strategies that we’ve employed to try protect our team and reduce the incidence of customer threatening situations.”

For the first seven weeks of 2023/24, sales growth has moderated for Kmart Group but remained steady for Bunnings.

Wesfarmers will pay a fully franked dividend of $1.03 per share, bringing its total dividends for the year to $1.91, up 6.1 per cent from last year.

In early trading, Wesfarmers shares were up 2.2 per cent to $50.52.