Wesfarmers' full-year profit could be all but wiped out by $2 billion in writedowns and restructuring costs related to its Target department stores and Queensland coal mine.
Wesfarmers, which also owns supermarket giant Coles, will take a post-tax impairment of between $1.083 billion and $1.283 billion on Target following an extensive overhaul in the wake of an accounting scandal.
There will be another $145 million of restructuring costs and provisions against Target, plus a $420 million-$600 million impairment against its Curragh mine in central Queensland.
With the conglomerate having made a $2.4 billion net profit in 2015, the combined impact looks likely to eat up a majority of its 2016 profit.
"We firmly believe in doing what's right for the long-term future of our businesses, and we have never shied away from taking tough action in the short term if that is what is required," Wesfarmers managing director Richard Goyder said.
"The decisions which we have outlined today reflect more difficult market conditions in both Target and Curragh, but we remain confident that, operationally, we have the right plans to improve future performances."
Wesfarmers says its final dividend won't be affected by the impairments, but net profit will also reflect a $50 million loss in Target's pre-tax earnings from stock clearance and lower margins even before the $145 million restructuring costs.
Those restructuring costs include about 240 previously announced redundancies, a new headquarters, a re-ordering of its supply chain.
The accounting scandal cost managing director Stuart Machin his job in April.
The business has been under pressure from rival Kmart, also owned by Wesfarmers.
"Target's new management team and I have acted promptly to clearly understand both the short- and longer-term opportunities for performance improvement," Wesfarmers department stores chief executive Guy Russo said.
"Through this process, I am very confident that, over time, there can be a great future for both Target and Kmart as parallel but differentiated brands in the market place."
At 1020 AEST, Wesfarmers shares were down 95 cents, or 2.26 per cent, at $41.02.
That was against the backdrop of a 1.52 per cent rise in the benchmark S&P/ASX200.
"I don't think it's come as a massive surprise to the market. But that whole area, obviously, is still pretty volatile and doing it tough," Bell Direct equities analyst Julia Lee said.
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