The Wesfarmers Ltd (ASX: WES) share price is ahead of the S&P/ASX 200 Index (INDEXASX: XJO) year to date, over the past year, and over the past week. In fact, despite lockdowns and bushfires, the Wesfarmers share price is up by 4% year to date.
The brands boosting the Wesfarmers share
Officeworks’ sales performance, up to the end of May for 2H20, rose by 27.8% against the prior corresponding period. This is a major step up from the 11.5% growth in 1H20. Similarly, Bunnings has seen its sales performance for 2H20 increase, so far, by 19.2% versus the 5.8% rise in 1H20.
This is a significant increase likely due to the company’s customers continuing to spend more time working, learning and relaxing at home. In a performance update on 9 June, the company claimed Bunnings had seen growth across all Australian trading regions and product categories. Pretty impressive.
Wesfarmers secret weapon
There are 2 secret weapons fueling the performance of Wesfarmers shares. First is the online company they purchased last year, Catch. Catch followed in the footsteps of permission marketing pioneer site, Daily Candy. The initial newsletter was ‘Catch of the Day’. Today it has evolved into an online marketplace.
Catch is not just an e-commerce site to sell products from K-Mart or Bunnings. It is trying to compete directly with Amazon.com, Inc. (NASDAQ: AMZN) or Kogan.com Ltd (ASX: KGN). Moreover, it sells products directly in competition with Kogan.
Catch saw its 2H20 sales performance so far improve by an astounding 68.7% against the previous corresponding period. In contrast, 1H20 reported a gross sales increase of 21.4%.
Across all their retail operations, Wesfarmers have seen total online sales growth of 89%.
The Wesfarmers management team has made quite a few tough decisions in recent time. They sold down their stake in the Coles Group Ltd (ASX: COL) at a near all-time high share price. In addition, they took the decision to close loss-making Target stores and to refocus on K-Mart and acted swiftly to permanently close 7 small-format Bunnings stores during the half.
Wesfarmers unintentionally holds a range of assets which were perfectly suited to the recent lockdown. It has also bought a company that places it directly in competition with Kogan for growing online sales.
Lastly, Wesfarmers management have shown the capacity to make hard decisions. These include, as mentioned, closing underperforming Bunnings formats, releasing capital from Coles for business growth and closing the door on underperforming Target stores.