The Wesfarmers Ltd (ASX: WES) share price is up more than 2% after reporting its FY23 report.
Wesfarmers owns a number of businesses like Officeworks, Catch, Kmart, Target, Bunnings and Priceline.
Wesfarmers share price
FY23 result
- Total revenue increased 18.2% to $43.5 billion
- EBIT (EBIT explained) increased 6.3% to $3.86 billion
- Net profit after tax (NPAT) went up 4.8% to $4.6 billion
- Final dividend of $1.03 per share, up 3%
- Full year dividend increased 6.1% to $1.91 per share
Let’s look at the three most important divisions.
Bunnings revenue rose 4.4% to $1.8 billion and earnings went up 1.2% to $2.23 billion. Kmart Group (which includes Target) saw revenue grow 16.5% to $10.6 billion and earnings increased 52.3% to $769 million. The Wesfarmers chemicals, energy and fertilisers (WesCEF) business experienced an 8.7% revenue increase to $3.3 billion, while earnings went up 23.9% to $669 million.
However, revenue and earnings growth was slower for all three of the big divisions in the second half of FY23.
For FY23, the healthcare division made $5.3 billion of revenue and $45 million of earnings. Wesfarmers is rapidly scaling this division with acquisitions.
Outlook for the Wesfarmers share price
The lithium business is expected to start production and sale of spodumene (raw lithium) during FY24. However, the rest of the WesCEF business is expected to see a significant earnings decline because of lower ammonia prices and higher (gas) costs.
Overall, Wesfarmers is hoping to adjust its costs in line with trading conditions.
In the first seven weeks of FY24, Kmart sales have continued to show strong growth, though the growth rate is moderating. Wesfarmers implied that Bunnings’ sales growth has been in the low single digits, while Officeworks sales were flat.
The business is expecting to invest in existing operations and in the development of platforms for long-term growth. It’s expecting net capital expenditure of between $1.1 billion to $1.4 billion.
Final thoughts on the Wesfarmers share price
I believe Wesfarmers is one of the strongest businesses on the ASX. I’m impressed that Kmart and Bunnings have managed to continue growing revenue and earnings.
It’s quite possible that the next 12 months could show a decline of revenue and earnings for the business, particularly if the retail environment considerably worsens. But, Kmart and Bunnings may be able to grow market share, and the lithium earnings should help in the coming years.
I’d be happy to buy it today for the long-term, I think this result has underlined how powerful some of its businesses are. It’s also one of the leading ASX dividend shares, in my eyes.
