The Wesfarmers Ltd (ASX: WES) share price is in focus after the company announced its FY24 first-half result.
Wesfarmers is the name behind a number of retail names including Bunnings, Kmart, Officeworks and Priceline.
FY24 first half result
Here are some of the main numbers from the first six months of FY24 to December 2023:
- Revenue grew 0.5% to $22.7 billion
- EBIT (EBIT explained) went up 1.6% to $2.2 billion
- Net profit after tax (NPAT) grew 3% to $1.43 billion
- Operating cashflow jumped 47% to $2.9 billion
- Profit / earnings per share (EPS) rose 2.9% to $1.26
- Interim dividend per share of $0.91, up 3.4%
Breakdown
Wesfarmers’ boss Rob Scott said the company benefited as households increasingly sought out value. It said its core offer of “everyday products with market-leading value credentials supported growth in sales and customer transaction numbers.”
Bunnings saw growth in both consumer and commercial sales, with total sales growth of 1.7%. Bunnings earnings before tax (EBT) grew by 0.3% to $1.28 billion.
Kmart benefited from the “market-leading value credentials of its Anko products as well as actions to drive cost efficiencies, and a moderation in some key input costs.” Kmart Group (including Target) total sales rose 5% to $6.08 billion, while EBT soared 26.5% to $601 million.
The performance of Bunnings and Kmart normally have the biggest effect on the Wesfarmers share price because of how much of the profit they make.
Officeworks sales went up 1.8% to $1.67 billion, while EBT grew 1.2% to $86 million. It has been working on productivity initiatives and disciplined management.
Wesfarmers chemicals, energy and fertilisers (WesCEF) revenue sank 21.2% to $1.1 billion, hurt by lower global commodity prices relative to elevated pricing in recent years. WesCEF EBT plunged 46.9%, which was hurt by higher WA gas costs.
Looking at the EBT of the smaller names – the industrial and safety EBT rose 4.3% to $49 million, the health division EBT was flat at $27 million and the Catch EBT loss improved $67 million to a $41 million loss after working on improving its unit economics, reducing its cost base and developing “enhanced marketplace capabilities”.
The health division has been investing for long-term growth within its operations and acquiring other businesses, including SILK Laser Australia and InstantScripts.
Outlook for the Wesfarmers share price
The company noted a low unemployment rate and strong population growth provide support for economic conditions in Australia, driving demand.
In the first five weeks of the second half of FY24, Kmart Group has continued to deliver “strong sales growth”, Bunnings sales growth has remained “broadly in line” with the first half, while Officeworks sales were in line with last year.
Wesfarmers is expecting domestic cost pressures in Australia and New Zealand to remain elevated because of inflation and wage cost increases, as well as energy and supply chain costs.
The company said WesCEF’s share of spodumene concentrate (raw lithium) for FY24 is expected to be approximately 50,000 tonnes. At this stage Mt Holland won’t make a profit because the cost of production is higher until it reaches full capacity.
I think Wesfarmers is one of the strongest retailers around, and one of the leading ASX shares overall. It’s not cheap right now, but I think buying it for the long-term could still make sense.