Wesfarmers is facing a $774 million hit to its bottom line from its struggling Target chain and the restructure of its liquor business.

The conglomerate says it is slashing the carrying value of the Target business on its books by $680 million, with the charge to be reflected in its accounts for 2013/14.

It is also taking a $94 million hit from the work being done to turn around its liquor business, including changes to its Liquorland and First Choice stores and product ranges.

But the charges will be offset by a $1 billion profit on the recent sale of Wesfarmers’ insurance arm, resulting in an overall gain of between $261 million and $301 million for its bottom line in the 2013/14 financial year.

Wesfarmers says the charge being taken against Target is related to the department store’s expected future cash flows and the goodwill apportioned to the business, which it acquired in 2007 when it bought the Coles Group.

It forecast Target’s earnings for the year to come in between $82 million and $88 million.

“Notwithstanding the revision to Target’s carrying value, we are pleased with the progress that has been made over the last 12 months in materially strengthening Target’s leadership team and we consider there to be many opportunities to significantly improve Target’s performance,” managing director Richard Goyder said in a statement on Wednesday.

Target’s sales continued to struggle during the March quarter, falling 3.6 per cent.

Its earnings slumped 44 per cent to $136 million in the 2012/13 financial year.

Shares in Wesfarmers were 84.5 cents, or two per cent, higher at $42.365 at 1042 AEST.

AAP