The latest Wesfarmers profit disproves a couple of things that many in business and the media are eager to sell: that times are tough and profits are hard to come by in retailing. Listen to David Jones, Myer, Harvey Norman and a host of writers in the business press and the message is, retailing is a black hole. Rotten, terrible.

Well, the Wesfarmers result proves the falsity of those arguments. The company lifted profit by nearly 11% to $2.126 billion and the stars were in its retailing businesses.

Three results stood out: Coles lifted operating profit 16.3% to $1.356 billion, hardware chain Bunnings lifted its earnings to $849 million, up 4.9%, and department store group Kmart was the real star, boosting its earnings 31.4% to $268 million on sales that were flat on the year before at about $4 billion. Even Target, the company’s laggard department store chain, saw earnings of $244 million, which were flat.

It’s down to good management and a bit of determination, especially at Coles and Kmart where outsiders have been brought in and turned the struggling chains around.

But Wesfarmers’ success doesn’t extend to a small part of its business — the investment in the private equity funds promoted by Gresham Partners, the 50% owned Sydney investment bank.

The accounts disclose the Gresham Private Equity Funds investment contributed a loss of $55 million, compared to a loss of $60 million last year, and a profit of $43 million in the 2009-10 financial year. As in last year’s annual report, directors said the loss resulted was due to non-cash revaluations of investments held. The funds sold the Witchery chain last month to Country Road. No hard and fast prices were revealed, but it would seem the sale was at break-even at best after several years of ownership.

But there must have been a second-half improvement because the loss of $55 million was just $9 million more than the $46 million in the six months to December 31, (compared to a loss of $28 million in the first half the 2010-11 financial year).

No contribution from Gresham Partners Group was recorded, against a $1 million figure for 2010-11 and the year before.

Interestingly, the 2011-12 accounts reveal that Wesfarmers has established a carrying amount account to reflect the value of the investments in these funds. The carrying value of the investments of the Gresham funds was cut to $71 million in the year to June, from $122 million in the 2010-11 year. That’s a rare black spot for Wesfarmers.

Does this mean that the value of these private equity funds of Gresham have shrunk by 45%? If that’s the case, its not the best advertisement for the joys of private equity.