Wesfarmers (WES): This morning, the last conglomerate on the ASX presented its full-year 2026 results, demonstrating that WES’s businesses are performing well, taking market share and unlike other retailers, not seeing any softness in demand from consumers. The HNW Income and Growth Portfolios have a 2.5% weight in WES.

Key Points:

  • Record Profits: Earnings increased by 8%, to $2.8 billion, with all divisions other than Officeworks performing strongly.   Kmart Group (Kmart & Target) continues its momentum, driven by a 6% increase in earnings, benefiting from ongoing operational digitalisation and cost control. Bunnings profits were rock solid, up 5%. WesCEF (Chemical, Energy and Fertiliser) and Health (Priceline Pharmacy) posted strong double-digit earnings growth. Officeworks saw sales growth, but profits were weaker due to cutting prices on the range and investing in systems.
  • Balance Sheet: WES has a very strong balance sheet with a net debt position of $5.3 billion. This is a business that can handle that level of debt, with Debt/EBITDA at 1.7x below the target range and debt costs being a low 3.75%.
  • Record Dividend: Full-year dividend up +7.7% to $2.22; this excludes the $1.50 capital return/special dividend paid in December 2025. WES has a good long-term record of returning cash and franking to shareholders (see the table below) and finished the year with a large franking account balance of $1.36 billion, down from $2.9 billion in FY2025.
  • Guidance: Wesfarmers did not provide any specific guidance for FY2027 but did disclose that Bunnings is continuing its strong sales growth in FY2027 assisted by unseasonable dry weather in July. Kmart and Officeworks have seen continuing sales growth, with production rates accelerating in lithium. This was a pleasant surprise as we expected some weakness in sales based on the commentary from other retailers in the August reporting season.

Portfolio Strategy: WES give the portfolio exposure to a stable, diversified stream of earnings exposed to the Australian economy primarily through hardware (Bunnings), office supplies (Officeworks), discount department stores (Target and Kmart), pharmacy (Priceline), chemicals and, in the near future, lithium.  WES is a very well-run company, with CEO Rob Scott consistently making good moves for shareholders since taking over in 2018. In the Portfolio, we only own the retailers that dominate their markets (Wesfarmers and JB Hi-Fi) and are the lowest-cost operators. This result from WES shows that value-conscious consumers are still happy to open their wallets.

WES finished -4.5% to $79.46, on what was largely a positive result.