The Wesfarmers Ltd (ASX: WES) the stock price rose 6.4% last month, marking a pleasant turnaround from most other months this year. This return compares to a 6% increase for the S&P/ASX 200 Index (ASX:XJO).
So Wesfarmers managed to outperform the broader ASX equity market last month, if only by a bit. But, every bit of feedback counts, in my opinion.
What happened to drive up the Wesfarmers stock price?
Besides the Reserve Bank of Australia’s (RBA) decision to opt for a slower interest rate increase in October, one of the most interesting things that happened regarding Wesfarmers was its annual general meeting (AGM).
Management highlighted how the company has been financially focused for decades, ensuring it has remained disciplined through a range of economic conditions and minimized the danger of “empire building or paying too much for an asset” that she would have liked to own.
The company expects to meet the challenges of a strong inflationrising interest rates, ongoing skills shortages and supply chain bottlenecks “will likely continue for some time.”
Wesfarmers highlighted that it is building the climate resilience of its business, achieving further emissions reductions and making “good progress” towards its net zero targets.
For example, 50% of Bunnings’ entire grid is powered by renewable electricity, from a combination of its own solar panel production and renewable energy contracts. All of its retail divisions are committed to meeting 100% of their electricity needs from renewable sources by 2025.
Investing in rooftop solar reduces its exposure to “expensive and volatile” energy costs and lowers its operating costs. This may help the Wesfarmers share price if it increases profitability.
Wesfarmers noted that it has a few priorities, including developing a market-leading data and digital ecosystem, better connecting its retail brands with customers. This is intended to improve the in-store experience and support the growth and profitability of retail businesses over time.
It launched the OneDigital division, which will include its subscription service, OnePass, its group asset called OneData, and the e-commerce marketplace called Catch.
It is also making progress in valuing its investments in new growth platforms, including decarbonization (with the Mt Holland lithium project) and growing demand for health and wellness (with its new Wesfarmers Health division, which includes Priceline). This allows Westfarmers to “benefit from these long-term megatrends”.
Each year, the project’s production of lithium hydroxide will be equivalent to powering one million battery electric vehicles, resulting in an annual saving of approximately 1.8 million tonnes of emissions.
Bunnings continues to expand its business offering, with the acquisition of Beaumont Tiles and the rollout of Tool Kit Depot.
I think all of these areas of growth can help the Wesfarmers share price in the long run.
The company noted that high supply chain costs, rising wages and higher utility costs, as well as a weaker Australian dollar, will impact its business in FY23. .
In terms of a trade update, the company said retail conditions remained “robust” and management was “satisfied”.
Australian consumer demand continues to be supported by “low unemployment and high levels of accumulated household savings.” However, the impact of rising interest rates and inflation is “starting to affect consumer behavior”, and households are starting to become more price sensitive.
Bunnings sales have been impacted by prolonged wet weather, but sales growth remains “resilient”.
To date, Kmart’s and Target’s combined sales growth in FY23 continues to be “satisfactory, with strong business results even after adjusting for the impact of lockdowns.” Kmart would increase its market share profitably.
Office sales are “broadly in line” with the previous year.