MENU

Is now an opportunity to buy Wesfarmers?

Wesfarmers (ASX: WES), the conglomerate that owns Coles, Target and Bunnings, announced lower than expected first quarter sales figures today. The share price fell more than 2% in early trade, before recovering most of those losses in the afternoon.

The worst divisional performer was discount retailer, Target, where sales fell 6.1%. The disappointing numbers were attributed to clearance of excess inventory and different promotional patterns compared to the prior corresponding period. In comparison, another discount retailer owned by Wesfarmers, Kmart, saw sales up 4.6% on the prior period.

The flagship supermarket business, Coles, posted a 4.9% gain in total sales versus the prior corresponding period. The company said the result was impacted by significant price deflation on food and liquor during the quarter, with price deflation on fresh food products being particularly acute.

All eyes will now be on the first quarter results of rival Woolworths (ASX: WOW) to be released on October 31. Coles’ net profit grew 13.1% in the prior financial year compared to a 24% rise for Woolworths. The fight for market share continues, with the high cost of living an important issue for many Australians. Both supermarkets aim to lure shoppers through promotions, discounting and loyalty programs.

Income-orientated investors should note that Wesfarmers trades on a slightly higher current dividend yield of 4.3%, compared to approximately 3.9% for Woolworths. Both businesses have defensive earnings streams for investors who are looking for consistent returns and a margin of safety.

Foolish takeaway

Investors in it for the long-term should look to take advantage of any short-term valuation dips in rock-solid businesses like Wesfarmers. Today’s results demonstrate the consistent if unspectacular nature of its business model. At the right price Wesfarmers is a worthwhile addition to any investor’s portfolio.

Looking for a top dividend stock to generate income along with capital growth? Discover The Motley Fool’s favourite income idea for 2013-2014 in our FREE research report, including a full investment analysis. Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now