The Wesfarmers Ltd (ASX: WES) share price is down more than 3% after the business gave a FY26 trading update at the AGM.
Wesfarmers is the owner of retailers Bunnings, Kmart, Priceline, Officeworks, Target and plenty more.
FY26 trading update
Wesfarmers said the Australian economy remains resilient, supported by a growing population, low unemployment and rising household disposable income.
The retail giant said consumer demand has “remained positive”, but cost of living pressures remain a challenge for some households and consumers “maintain a cautious outlook”.
Wesfarmers noted higher costs across the domestic supply chain, labour, energy and regulatory costs. The company also said it’s seeing subdued business-to-business sales growth.
Wesfarmers is investing in productivity initiatives to help offset the higher costs and maintain competitive prices for customers.
Sales performance
It reported that Bunnings’ year to date sales growth is ahead of growth in the second half of FY25, with solid trading in the consumer segment. Commercial sales also delivered “positive sales growth” despite soft sales to builders reflecting weak residential construction activity.
The company said Kmart Group is benefiting from the strong value credentials and quality of its Anko product range. Year to date sales growth was “broadly in line” with the second half of FY25. It’s investing in various initiatives to help its growth, including its fulfillment centre, digital platforms (including a marketplace) and digitising operations.
Officeworks’ sales momentum has continued, but HY26 earnings will be hurt by lower operating margins, costs of resetting the operating model, restructuring initiatives and an ERP replacement. Earnings are expected to be down by between $15 million to $25 million. Costs and financial performance are expected to be better in the years ahead.
Priceline continues to deliver “strong network sales growth”, with improved retail execution, network expansion, price reductions on key value lines and the introduction of new and exclusive brands.
For WesCEF (chemicals, energy and fertiliser), the ramp-up of activity at Covalent’s lithium hydroxide refinery continues to progress well. But, earnings for this division will be impacted by higher contracted WA natural gas costs, as well as lower expected LPG content in processed gas.
Trading conditions remain challenging or the industrial and safety division, with subdued demand across mining and resources.
Final thoughts on the Wesfarmers share price
I view Wesfarmers as one of the best retail businesses on the ASX, so any decline in the valuation makes the business more appealing. Kmart and Bunnings are impressive performers, though they’ll need to continue growing sales and earnings to justify the relatively high Wesfarmers share price and expectations.
It wouldn’t be the first investment I’d buy today, but if I were a long-term shareholder I’d be satisfied with the progress over the last few years. For now, there are other ASX dividend shares that are more appealing.
