{"id":17003,"date":"2018-09-12T04:30:33","date_gmt":"2018-09-12T04:30:33","guid":{"rendered":"http:\/\/thepatientinvestor.com\/?p=17003"},"modified":"2022-05-24T05:08:11","modified_gmt":"2022-05-24T05:08:11","slug":"wesfarmers-ltd-wes","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2018\/09\/12\/wesfarmers-ltd-wes\/","title":{"rendered":"Wesfarmers Ltd (WES)"},"content":{"rendered":"

Stock: Wesfarmers Ltd<\/strong>
\nSymbol: WES<\/strong>
\nExchange: ASX
\nFinancial Year-end: 30 June
\nLatest price: $51.34<\/strong>
\nMarket cap: $58.1 billion AUD
\nDate: 11 September 2018<\/p>\n

Sector: Consumer Staples
\nIndustry: Food & Staples Retailing
\nInvestment Theme: Dividends & Growth<\/p>\n

Company Profile<\/h2>\n

From its origin in 1914 as a Western Australian farmers’ cooperative, Wesfarmers has grown into Australia’s largest listed conglomerate. Headquartered in Perth WA, Wesfarmers’ businesses span the retail and industrial landscape.<\/p>\n

Retail delivers the bulk of group earnings: 88% of FY18 EBIT after allowing for sale of Resources. Operations include 809 Coles supermarkets; 711 convenience stores; 228 Kmart discount department stores and 256 Kmart Tyre & Auto centres; 187 large- and 116 small-format Target apparel and homewares stores; 899 Liquorland, 1st Choice and Vintage Cellars liquor outlets; 88 hotels; 165 Officeworks office supplies stores; and 259 Bunnings home improvement warehouses, 78 smaller format stores and 32 Trade outlets across ANZ.<\/p>\n

The Industrials division includes chemicals and fertilizers, gas processing and distribution, industrial and safety products and coal-mining (sold in August 2018).<\/p>\n

Markets & Competitors<\/h3>\n

Woolworths is Wesfarmers’ largest retail competitor, operating more than 1000 supermarkets, 183 Big W discount stores, and more than 1500 liquor outlets. Competition from Woolworths and Aldi (460 stores) has exerted pressure on Coles’ margins: EBIT fell to 3.8% of Revenue in FY18, compared to 4.1% in FY17.<\/p>\n

Bunnings is the jewel in Wesfarmers’ crown, with the largest market share (30%) in the Australian hardware\/home improvement\/DIY sector4<\/sup>. Competing retailers include Home Timber & Hardware and Mitre 10 chains, as well as a large number of independents. Woolworths, through their Masters joint venture with US home improvement giant Lowes, tried to challenge Bunnings’ market dominance but failed dismally, ending in Masters closure and a $3.25 billion write-down.<\/p>\n

Kmart and Target were merged under a single head of Department Stores (Ian Bailey to replace Guy Russo in November 2018). Some Target stores were rebranded as Kmart while others were closed due to their poor performance which resulted in FY16 $1.27 billion and FY18 $0.3 billion impairment charges before tax1<\/sup>.<\/p>\n

Officeworks dominates the office supplies and stationery market but faces competition from Amazon with the launch of its online business supplies website.<\/p>\n

Wesfarmers also hold a 25% stake in BWP Trust, a listed REIT which owns 79 Bunnings warehouse properties, 2 of which are now vacant, with Bunnings relocating some stores to former Masters premises.<\/p>\n

Segments<\/h3>\n

Contribution to group EBIT by segment:<\/p>\n

\"FY18<\/p>\n

Acquisitions and disposals will significantly alter composition of the group in FY19.<\/p>\n

Acquisitions and Disposals<\/h3>\n

On 16 March 2018, Wesfarmers announced their intention to spin-off Coles as a separate ASX-listed company with an independent board, to be completed in FY19. Wesfarmers would retain a minority ownership interest (up to 20%) and a substantial ownership stake in Flybuys (supporting Wesfarmers\u2019 & Coles\u2019 data and digital initiatives)2<\/sup>.<\/p>\n

Apart from the Coles spin-off, in recent months Wesfarmers shed a number of smaller subsidiaries:<\/p>\n