Is Wesfarmers a buy?
Is Wesfarmers worth buying now or is it expected to go lower
Max W
The Latest Q&A
Answer
Hi Max,
When WES spun out Coles (COL) it experienced a sharp uplift as you’d expect given a greater proportion of earnings then came from the higher growth business in Bunnings which now accounts for ~57% of their profits. When we include the contribution from department stores which is around 25%, it’s clear that WES is now more of a discretionary retailer than a Staple retailer. That essentially means their earnings in our view will become more volatile, although growth will be higher. We’re cautious on discretionary retailing here after what has been a very strong 12 months for them. As the country re-opens, we suspect there will less buying stuff and more travelling. We would only be interested in WES below $50.
