Australian retail giant Coles Myer is determined that it will turn around its loss-making department stores after the company failed to improve on its reduced profit forecast.

The company has reported an annual net profit of A$353.8m (US$193.2m), which meets its previously stated forecast of $350m. The posted net profit is up 6% from the year earlier value.

Coles' shares rose by 5% to their highest closing value in more than two months, after experiencing a 29% drop in value since February.

The company's sales increased by 8.7% in the last year, to $25.5bn. Coles Myer is Australia's largest retailer in terms of sales, but the company's main rival in the Australian retail market, Woolworths, has been making up ground, closing the gap between the two retailers' sales figures to just $1bn.

Coles Myer said its Kmart and Target discount stores are gradually improving, but its department stores remain the weak link in the chain. For the first time in five years, Kmart reported a sales increase and an expansion of its market share. It is hoped that Coles' Myer Grace department store division will achieve a similar turnaround this year.

The problems of the company's boardroom split still remain, with chairman Stan Wallis due to leave the company after the 20 November annual meeting. The board has yet to decide on Wallis' successor, reported Reuters News.