Wesfarmers releases annual general meeting and gives positive update

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Wesfarmers releases annual general meeting and gives positive update

  • Positive outlook for FY21
  • Growth in digital penetration
  • More stock is being held in preparation for the Christmas season

On the 12th of November, Wesfarmers Limited (ASX: WES) released their annual general meeting Chairman’s address and managing director’s address, accompanied by the release of a trading update.

The group has experienced challenging times due to COVID-19 this year and has implemented new safety measures which from the beginning of financial year to 31st of October, totalled AUD23 million. Estimated costs come to AUD15 million per quarter whilst COVID-19 remains a threat, with the Victorian lockdown a contributing factor.

The COVID-19 disruptions and costs were offset by a growth in demand across Bunnings, Officeworks and Catch, following strong 2HFY20 results. Bunnings sales have grown by 25.2 per cent in FY21 as of October. Kmart has grown 3.7 per cent and Catch by 114.4 per cent. Unfortunately, Target sales have dropped by 2.2 per cent but Officeworks rose by 23.4 per cent.

Altogether, the group has delivered online sales growth of 166 per cent, excluding Catch. Including Catch, the group increased online sales to AUD1.3 billion in the year to date.

Bunnings was a great performer in commercial and consumer segments. The performance is attributed to more people staying at home and undertaking projects around the home whilst COVID-19 remains a threat.

Kmart and Target have grown in-home, active and kids’ categories, but growth became offset in apparel products. Digital penetration continues to expand by 7.8 and 13.2 per cent year to date. Unfortunately, in July and August, there were long lead times for certain items due to operational issues, stock has increased now in preparation for the Christmas period.

Furthermore, the group’s Chemicals, Energy and Fertilisers demand for ammonium nitrate is resilient but as always is dependent on commodity prices and seasonal conditions. Hygiene products have also supported growth, yet demand for gas, oil and general manufacturing has been weaker.

In the general annual meeting, the company reflected  the strong profits which allowed for a final dividend of AUD0.77 fully franked, along with an AUD0.18 fully franked special dividend. This allowed for a total dividend of AUD1.70.

Wesfarmers stance on providing long term positive results was reaffirmed, whilst looking at the interests of all stakeholders and upholding a high level of ethical and sustainable standards. The total recordable injury frequency rate has thus dropped by 23 per cent last year, with 2700 new team members added to the group.

The outlook for Wesfarmers references the strong recent trading and increased utilisation of digital infrastructure. Progress is being made in optimising the Covalent Lithium project and final investment decisions will be considered in Q1 of the next calendar year. Wesfarmers affirms they are well-positioned for many economic scenarios with a robust balance sheet able to give them flexibility for whatever is to come.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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