Wesfarmers profit beats estimates but consumer caution hits shares
Wesfarmers posts 8% profit rise but warns on consumer spending, sending shares to three-month low.
Wesfarmers, Australia's largest non-food retailer, saw its shares fall to a near three-month low on Thursday after the company cautioned that pressure on household budgets could dampen spending. The warning overshadowed a better-than-expected rise in annual profit.
The conglomerate, which operates retail chains including Bunnings and Kmart, reported net profit after tax excluding significant items of A$2.87 billion for the year ended June 30, up more than 8% from the previous year. That figure surpassed the Visible Alpha consensus estimate of A$2.84 billion.
Despite the profit beat, investors focused on the company's cautious outlook. Wesfarmers noted that uncertainty around inflation, house prices, interest rates, and tax settings is affecting consumer sentiment, while higher business costs are weighing on confidence and spending.
Sales growth at Bunnings, its home improvement arm, was slightly stronger in the first seven weeks of fiscal 2027 compared with the 3.9% rise recorded in the second half of last year. However, analysts at Jefferies pointed out that this missed a Visible Alpha consensus estimate of 4.8% for the first half of fiscal 2027.
High interest rates and cost-of-living pressures have driven more customers toward Wesfarmers' value-led retail offers, supporting sales volumes at Kmart Group and Bunnings. The company's chemicals, energy, and fertilisers division, WesCEF, saw earnings hurt by a lag in passing through higher ammonia prices after the Middle East conflict, though stronger lithium earnings partly offset this.
Wesfarmers said it expects business costs to remain high in fiscal 2027, driven by labour, energy, and supply-chain expenses. It forecast net capital expenditure of A$1.30 billion to A$1.50 billion for the year, above the Visible Alpha consensus estimate of A$1.07 billion.
The 112-year-old conglomerate declared a final dividend of A$1.20 per share, up from A$1.11 apiece last year.
In a separate announcement, Wesfarmers said Bunnings Group Managing Director Michael Schneider will retire in February 2027 and will be succeeded by finance chief Rachael McVitty. Jefferies noted that while the departure of a highly effective executive is never positive, Wesfarmers has a solid track record of management succession.