WES -4.58%: Produced another typically dependable result, with FY26 profit modestly ahead of expectations, revenue broadly in line and Bunnings continuing to grind higher despite a difficult consumer backdrop. There were few major surprises across the retail portfolio, while Health and Chemicals, Energy & Fertilisers provided some additional growth. The issue isn’t the quality of Wesfarmers — that’s rarely in question — but whether modest earnings growth is enough when higher capex, borrowing costs and the ongoing Mt Holland lithium ramp-up are competing for cash.
Key results:
- Revenue of A$47.27bn, up 3.4% and broadly in line with A$47.21bn expected.
- Net profit (NPAT) of A$2.87bn, down 1.8% but ~1% ahead of A$2.84bn expected.
- Bunnings revenue of A$20.40bn, up 4.1% and in line with expectations.
- Kmart Group revenue of A$11.75bn, up 2.8% versus A$11.80bn expected.
- Health revenue of A$6.47bn, up 9.1% and ahead of A$6.38bn expected.
- Chemicals, Energy & Fertilisers revenue of A$3.14bn, up 5.9% and ~4% ahead of expectations.
- Final dividend increased to A$1.20ps, from A$1.11ps.
Early FY27 trading is steady rather than spectacular. Bunnings has accelerated slightly from 2H26, helped by dry July weather, Kmart is tracking around its 2H growth rate and Officeworks remains positive but has moderated. Meanwhile, FY27 net capex is stepping up to A$1.3-1.5bn, including around A$200m for Mt Holland, while higher debt, spending and funding costs will push borrowing expenses higher. The Covalent Lithium refinery also remains a work in progress, with production expected to accelerate through 2H27.
MM’s view: It’s hard to fault WES operationally, but equally hard to get overly excited by this result. Bunnings remains one of the best retail assets on the ASX, Kmart continues to hold its own and Health is developing into a more meaningful contributor. The problem is the price investors pay for that quality. With group EBIT growing just 0.6%, capex heading higher and Mt Holland still consuming capital rather than proving its worth, WES needs more than a dependable result to drive material upside. The dividend increase is welcome and the core franchises remain first class, but we’d want either a better entry point or a stronger earnings acceleration before becoming more enthusiastic.
MM is neutral toward WES
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