The Wesfarmers Ltd (ASX: WES) share price is in focus after reporting its FY25 first-half result which included profit and dividend growth.
Wesfarmers is the name behind retailers like Kmart, Bunnings, Officeworks and Target.
Wesfarmers FY25 first-half result
Here are some of the highlights from Wesfarmers’ report for the six months to 31 December 2024:
- Revenue grew 3.6% to $23.5 billion
- EBIT climbed 4.7% to $2.3 billion
- Net profit after tax (NPAT) rose 2.9% to $1.47 billion
- Operating cashflow dropped 11.1% to $2.58 billion
- Interim dividend per share up 4.4% to $0.95
Let’s look at the performance of some of the individual divisions.
Divisional performance
Bunnings Group saw total sales climb by 3.1% to $10.26 billion. Earnings increased 3.1% to $1.3 billion thanks to strong consumer sales growth, continued growth in the commercial division and improved productivity.
Kmart Group (including Target) experienced a 2% rise in sales to $6.2 billion. Kmart Group earnings climbed 7.2% to $644 million as a result of productivity, including digitalisation of operations and the integration of Kmart and Target’s systems and processes.
Kmart and Bunnings are key supports for the Wesfarmers share price.
Officeworks sales climbed 4.7% to $1.75 billion. Earnings climbed 1.2% to $87 million, it was impacted by the costs of the acquisition of Box of Books, the closure of Circonomy and increased competitive intensity.
Wesfarmers chemicals, energy and fertilisers (WesCEF) revenue climbed 9.5% to $1.2 billion. Earnings rose 2.9% to $177 million, supported by favourable AN recontracting, but impacted by lower global commodity prices.
Wesfarmers Health revenue increased 8.9% to $3 billion. Earnings rose 3.7% to $28 million, though underlying earnings rose 13.9% to $41 million. Earnings growth in ‘consumer’ was offset by the performance of its pharmaceutical wholesale division (hurt by higher supply chain costs).
Industrial and safety revenue declined 1.9% to $990 million. Earnings declined 8.2% to $45 million, but underlying earnings increased 6.1% excluding restructuring costs of $7 million to reset the cost base.
Wesfarmers said that, overall, the increase in profit in a challenging environment highlights the strong execution across the group.
Outlook for the Wesfarmers share price
The company said it continues to invest to strengthen its existing divisions and develop platforms for growth.
Portfolio actions to wind down Catch and sell Coregas demonstrate its “financial discipline and focus on shareholder returns”, according to Wesfarmers.
The company said cost of living and cost of doing business pressures are “expected to continue” despite the recent easing of interest rates.
Retail divisions are expecting to continue to benefit from “strong value credentials and by expanding their addressable markets.”
In the first six weeks of the second half of FY25, Bunnings and Officeworks continued “solid sales momentum” with sales growth broadly in line in HY25, while Kmart Group sales growth has accelerated.
The lithium (Covalent) project is expected to complete construction and commissioning of the refinery with first production in mid-2025.
I think Wesfarmers is a great business, but the company is now trading on a much higher valuation than it used to. I don’t think it’s a great buy today, but I’d be a happy long-term shareholder.
