Retail mega-group Wesfarmers [ASX:WES] — owner of Kmart, Officeworks and Bunnings — has released its latest take on its market position, taking into account all current macroeconomic challenges that are impacting business.
WES shares were mostly flat this morning. Nevertheless, the $55.79 billion dollar company is still worth a hefty $49.19 per share.
Shorter term, metrics have not been high. However, the group has managed to grow value by more than 7% in the share market year-to-date:
Source: TradingView
Wesfarmers remains focused on challenging retail climate
Today, the retail conglomerate presented strategies to achieve within the current high inflationary, low consumer spending market. With the time passed for government handouts and lower interest rates, the group has acknowledged new strategies are in order.
Wesfarmers said that it has a long-term focus on investment support throughout the upcoming trading cycle, which it says has received some benefits from a continued investment strategy during COVID-19.
The group says that it expects to see fiscal 2023 net capital expenditure of $1.1 billion–$1.2 billion.
Wesfarmers aims to continue investing in technology and automation opportunities across divisions, while reigning in and resetting costs following rapid growth during the pandemic, to better suit a time when consumer spending and government incentives have slowed.
Head of Wesfarmers, Rob Scott, has deemed the ‘honeymoon period’ to have officially ended, with the business facing a much tougher consumer environment.
However, Mr Scott was confident the business is in good shape to weather the current macro environment, with certain growth possibilities arising in divisions such as lithium and healthcare.
The environment now is looking very different to that of the pandemic — with consumers looking for more value for money — sourcing cheaper alternatives as the cost-of-living battle deepens.
Having said that, Mr Scott believes most of the Wesfarmers product mix meets these needs well — with much of its business providing the essentials at good value for money — which is something the group will continue to strive to provide.
While Mr Scott is game for more acquisitions to further grow the business portfolio, he reassured investors that the group will continue to monitor the situation and maintain discipline so as not to make a wrong move.
Possible acquisitions in the pipeline include SILK Laser Clinics [ASX:SLA] and InstantScripts. However, so far, it has been outbid by a Hong-Kong-based group called EC Healthcare for SILK, and talks continue behind the scenes for the digital scripts service provider.
Mr Scott commented that the expectation for net capital expenditure in FY23 is majorly related to growth capital expenditure.
He reminded shareholders that the group’s total shareholder returns have exceeded the wider market since its initial listing back in 1984.
Mr Scott added that this alone demonstrates the group’s ability to demonstrate a working operational model, and is confident that the group can continue to grow and deliver despite a tighter market sentiment.
Wesfarmers maintains balance sheet strength with significant headroom and undrawn bank facilities of about $2 billion.
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Clues are everywhere, have you noticed any of them?
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If you want to know more click here.
Regards,
Mahlia Stewart
For The Daily Reckoning Australia
