Wesfarmers’ Share Price Sinks on Results, Special Dividend Announced

Shares in Wesfarmers Ltd [ASX:WES] are trading lower today on the back of mixed full-year results.

The WES share price was higher briefly this morning, hitting $49.21 before sinking below yesterday’s close.

The broader ASX 200 is down today too, weighed down by the torrent of profit results released this morning.

At the time of writing, WES share are down 17.5 cents, or 0.36%, to trade at $48.71 per share.

Through WES’s mixed results, there was at least something for income investors, as the diversified giant announced a special dividend.

Wesfarmers says COVID restrictions are too much

WES was certainly not hit as bad as some during the height of the COVID-19 pandemic.

But group CEO Rob Scott has called for reduced lockdowns and border closures.

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This is despite the strong sales growth from WES-owned businesses such as Bunnings and Officeworks.

Both recorded double-digit sales growth of 13.9% and 20.4%, respectively.

A series of one-off losses dropped statutory net profit by 69% — from $5.5 billion in 2019 to $1.62 billion.

Wesfarmers cut the value of Target by $525 million and rung up $110 million in restructuring costs., although some of its losses were offset by the sale of its 10.1% stake in Coles Group Ltd [ASX:COL].

Last year’s statutory net profit was similarly boosted by the initial spinoff of COL, as well as a series of business sales totalling $3.17 billion.

We’ve become accustomed to seeing dividends slashed or cut entirely this year.

And WES is no exception.

Excluding significant items (like one-off losses), revenue actually grew by 7.4% in FY20.

Accordingly, WES said it would pay a special dividend of 18 cents per share after selling two-thirds of its stake in COL for more than $2 billion.

This brings the total divided to $1.70 per share, which is still comparably lower than last year’s $2.78 per share dividend.

What does a post-COVID landscape look like for Wesfarmers?

Bunnings and Officeworks certainly benefited from consumers being forced to spend more time at home.

Bunnings’ revenue beat consensus estimates by more than $0.5 billion.

WES also capitalised on its acquisition of online retailer Catch, which benefited from the acceleration in online spending during the pandemic.

Though its other retailers, Target and Kmart, struggled.

In May, WES announced a sweeping transformation of Target.

This will see a number of stores closed or transformed into Kmart stores.

Earnings from its chemicals, energy and fertilisers business fell 9.2%, thanks to lower prices and volumes in the energy sector.

And its industrial and safety profits plunged 53.5% due to lower corporate uniform sales across Australia and the UK.

Despite the difficult operating environment, WES shares have grown ~18% this year to hit an all-time high.

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Kind regards,

Lachlann Tierney,

The Rum Rebellion

Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 

The Rum Rebellion