The transformation of Target stores into Kmarts/K Hubs has proved fruitful for Kmart Group in FY21, Wesfarmers reported in its FY21 results.
The network changes - which involved the closure of 75 Target stores and the conversion of 92 store into Kmart outlets - were completed in FY21 and delivered positive results for the group.
"Kmart Group completed the planned changes to the Kmart and Target store networks during the year, with trading results from converted stores exceeding internal expectations," Wesfarmers said in a statement.
"Including significant items associated with these changes, Kmart Group recorded earnings of $634 million," the business said.
Other factors driving growth for Kmart and Target during the year include higher sales, lower clearance costs and an improvement in the cost of doing business as a result of the network changes.
Kmart Group reported a 8.3% increase in revenue to $9,982 million for the year.
Earnings before significant items increased 69% to $693 million.
"This was partially offset by higher operational costs associated with online fulfilment and ongoing investment in technology in Kmart," Wesfarmers said.
"Kmart continued to invest in key strategic initiatives to enhance its customer offer, increase resilience and flexibility in its supply chain and support the development of data and digital assets and capabilities," the business said.
Meanwhile, sister brand Catch delivered a 41% increase to gross transaction value for the year.
"Gross transaction value growth moderated in the second half, reflecting the rapid shift to online channels in the prior corresponding period," Wesfarmers commented.
"Catch’s earnings were impacted by investment in technology, marketing and fulfilment capacity to support long-term growth, as well as a number of enhancements to its subscription program," the business said.