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Retail arms underpin Wesfarmers’ solid interim numbers
Wesfarmers (ASX:WES) notched an improved half-year result to December 31, 2024, buoyed by strong performances by the homewares retailer Kmart and the hardware chain Bunnings that defied weak consumer sentiment.
The Perth-headquartered retail and industrial conglomerate is now poised for continued growth in the second half of the 2025 financial year, building on its interim statutory net profit after tax (NPAT) of $1.467 billion – a 2.9 per cent increase year-on-year.
Shareholders reaped the benefits with the board approving a fully franked interim dividend of 95 cents a share, up 4.4 per cent from the previous corresponding period. But investors remain wary of a stock exposed to retail and lithium, with the price only advancing six per cent in the past year to close at $69.83 on Tuesday.
Managing director Rob Scott (pictured) attributed the group’s performance in a challenging environment to strong execution across the divisions, with strategic initiatives driving growth and efficiency.
In the company’s half-year results announcement, he acknowledged that upward pressure on both the cost of living and cost of doing business continued to significantly impact many households and businesses.
The conglomerate ‘s commitment to enhancing shareholder returns is evident in its recent portfolio management decisions. It is selling Coregas to a subsidiary of Nippon Sanso Holdings Corp for $770 million, subject to regulatory approvals.
Additionally, Wesfarmers announced in January that Catch will cease trading as a standalone business in the fourth quarter of the 2025 financial year, a move expected to eliminate losses associated with the online retailer.
The company emphasised that these portfolio actions align with shareholders’ best interests and will enhance the earnings performance, reinforcing its commitment to financial discipline and shareholder returns.
It’s not all belt-tightening. Wesfarmers has a new player in the retail market, rebranding a Priceline outlet in Sydney’s north-west as Atomica to tap into the heathy demand for beauty and skincare products that has underpinned the rapid growth of Mecca and MCoBeauty. It hopes to open four more stores by the end of this financial year.
Looking to June 30, its retail divisions are well-positioned to continue benefiting from their value propositions. The company reported solid trading in the first six weeks of the second half, with Bunnings and Officeworks maintaining sales momentum in line with their first-half performance. Kmart has seen even stronger sales growth compared with the first half, supported by its distinctive Anko product offering.
Wesfarmers’ data and digital strategy, spearheaded by OneDigital, continues to accelerate, offering customers enhanced omni-channel experiences across retail and health divisions. The company is actively developing a group retail media network that is expected to create additional shareholder value by leveraging its extensive customer data assets.
In the resources sector, Wesfarmers and its Chilean joint venture partner are progressing the Covalent lithium project at Mount Holland in Western Australia. The integrated lithium mine, concentrator and refinery are on track for completion with the first product expected by mid-calendar year 2025, potentially providing another significant value driver for shareholders.
Despite the positive outlook, Wesfarmers acknowledges several challenges. First and foremost, domestic cost pressures are expected to persist, driven by labour, energy and supply-chain costs and compounded by a weak Australian dollar. To mitigate these impacts, the divisions will continue implementing productivity initiatives, including technological investments to digitise operations.
The company also noted that cost-of-living pressures are expected to continue affecting consumer spending, despite the recent interest rate cut. Geopolitical developments add another layer of uncertainty to the economic outlook for the 2025 calendar year.
As Wesfarmers navigates the remaining months of the 2025 financial year, its diversified business model, strong balance sheet and strategic focus on long-term value creation position the company to continue delivering for shareholders despite ongoing economic challenges.
