Wesfarmers Share Price Slides on Full-Year Results (ASX:WES)

The share price of Wesfarmers Ltd [ASX:WES] has fallen today, on a weaker ASX and the release of their full-year results.

At the time of writing, WES shares are down 23 cents or 0.52% to $43.85 per share.

ASX WES Share Price - Wesfarmers Shares

Source: Tradingview.com

The share price began to take a downwards turn in late August, with that momentum continuing well into the current month.

Wesfarmers slashes dividends

FY20 hasn’t been easy on many companies’ balance sheets.

It’s been no different for WES.

In their full-year results announced on Sunday, WES flagged a drop in net profit of 69.2% to $1.7 billion.

That is despite revenue growing by 10.5% to $30.8 billion.

The drop in profit means that WES will slash their total dividend to $1.7 per share (including an 18-cent special dividend) from $2.78 per share last year.

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So, what gives?

There are a few things important to consider here.

And they really make a difference when analysing WES’ financial performance.

FY19 results saw a considerable contribution from the demerger of Coles Group Ltd [ASX:COL].

Which have skewed profits for this year.

Accounting for this, net profit after tax actually grew by 8.2% to $2.1 billion.

Wesfarmers Sales Performance

Source: Wesfarmers

Sales growth was strong for Bunnings and Officeworks due to increased demand for products as customers spent more time working, learning, and doing projects at home.

And Kmart managed to boost sales despite tricky operating conditions caused by lockdowns.

WES said online sales were strong, gaining 60% for the year to $1.5 billion, or $2.1 billion including Catch.

Which demonstrates the continued shift in customer shopping preferences.

What’s next for Wesfarmers?

With Bunning and Officeworks the standout performers, the rest of WES’ businesses have struggled in recent years.

Namely, Target and Kmart.

In May, WES announced a sweeping transformation of Target.

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

However, amongst the mixed results, WES managed to generate a positive cash position of $0.5 billion.

A good turnaround from last year’s net financial debt of $2.1 billion.

Although the share price is currently depressed, FY21 could be shaping up to be a more positive year for WES.

WES has been pushing the Victorian Government to allow retail businesses to reopen from 28 September.

WES CEO Rob Scott commented:

‘…Open, large-format stores with best-practice COVID-safe plans in place and have served millions of customers a week without a single recorded customer transmission.

Which describes the layout of many WES-owned stores.

However, the Victorian Government hasn’t made any promises.

Regards, 

Lachlann Tierney,
For The Rum Rebellion

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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. 


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