A difficult week for Wesfarmers on the back of a soft first-quarter update from Target US (TGT US), speaking to an inventory backlog amid waning consumer demand. As consumers tighten their belts, retail becomes less attractive with more income going towards paying off mortgages and buying fuel. Fortunately for Wesfarmers, their business is a bit more than the one-hit-wonder compared to Target in the US with the discount department store (DDS) segment contributing around 10%. Their total retail exposure, including Bunnings & Officeworks, does make up the majority of earnings still with Bunnings around 65% alone. The less talked about WESCEF (Chemicals, Energy & Fertilizers) is building out its own corner of the earnings profile though and UBS upgraded the stock to a buy this week largely on the back of their 50% stake in Covalent Lithium which, by their numbers, is now worth $6.4b.
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Performance update for March, stocks that drove returns & our current positioning
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Fri 19th April – ASC200 -117pts, Pilbara (PLS), Whitehaven (WHC) & Woodside (WDS)
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Market Matters Research Lead Shawn Hickman with David Koch
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Friday 19th April – DOW up 22pts, SPI down -55pts
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MM remains bullish WES
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