Wesfarmers (ASX:WES) share price just hit a record all-time high

The Wesfarmers Ltd (ASX: WES) share price just hit a record all-time high. Here's why 2020 was a standout year.

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Wesfarmers Ltd (ASX: WES) share price has rallied in recent weeks to a record all-time high of $51.90.

Its diversified business has proved to be resilient and in demand throughout COVID-19, as reflected by its strong earnings growth and dividend. At the time of writing, the Wesfarmers share price is trading 0.74% down at $50.87.

Wesfarmers share price higher on strong earnings 

The Wesfarmers business generated revenue growth of 10.5% to $30.85 billion with net profit after tax increasing 8.2% to $2.1 billion in FY20. Bunnings, Kmart, Officeworks and Catch delivered strong sales growth for the year. Earnings in Bunnings and Officeworks were particularly strong and demonstrated the ability of these businesses to rapidly adapt to the changing needs of customers. 

Bunnings achieved strong sales and earnings growth as customers spent more time at home and undertaking projects at home. Bunnings contributed $14.99 billion, or almost half the group's revenue in FY20.

Throughout the year, Bunnings continued to execute its strategic agenda and accelerate the development of its digital offer. The Australian rollout of Click and Deliver was completed, the New Zealand e-commerce platform was launched and Drive and Collect offering was developed. 

Kmart Group's revenue from continuing operations increased 7.2% over the year. However, earnings were impacted by significant items associated with the restructure of target and payroll mediation costs. Kmart generated $9.2 billion in revenue, or 29.8% of the Group's revenue. 

In contrast, the financial performance of Target has been unsatisfactory and loss-making in FY20, said Wesfarmers managing director, Rob Scott. In May 2020, the company announced a number of actions to address its structural challenges, simplify Target's operating model and deliver more value from the store network. 

Officeworks was a standout performer in FY20 with earnings increasing 13.8%, driven by strong sales growth in stores and online. Officeworks contributes just under 10% of the Group's total revenue. In the second half, it saw significant demand for technology, office furniture and learning and education products, as people spent more time working and learning from home. 

Foolish takeaway

The Wesfarmers share price went from strength to strength in 2020. Its strong earnings meant that the company could continue to pay a dividend, in a year where many companies had to slash or defer payments.

While Wesfarmers could not provide an outlook for FY21, it did note that the performance of Bunnings is expected to moderate following the extraordinary growth in the second half of 2020. 

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Retail Shares

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Retail Shares

3 reasons this broker thinks Woolworths shares are a cheap buy

Is this supermarket giant being undervalued by the market?

Read more »

A woman sits on sofa pondering a question.
Retail Shares

ASX retail shares mixed amid modest April sales growth

What does the latest sales data mean for ASX retail shares?

Read more »

Man on a laptop thinking.
Broker Notes

Why did Goldman Sachs just downgrade Wesfarmers shares?

The ASX 200 conglomerate has had a ripper run of share price growth. So why is Goldman Sachs downgrading it?

Read more »

Woman checking out new iPads.
Retail Shares

Dump 'em! Top broker says sell these 3 ASX retail shares

This comes amid high interest rates, weak retail sales, and persistently negative consumer sentiment.

Read more »

A woman looks at a tablet device while in the aisles of a hardware style store amid stacked boxes on shelves representing Bunnings and the Wesfarmers share price
Retail Shares

What is the price target for Wesfarmers shares?

Is there further success coming for this retail giant?

Read more »

A laughing woman pushes her friend, who has her arms outstretched, in a supermarket trolley.
Retail Shares

Goldman says these 6 ASX retail shares are a buying opportunity

The latest retail trading data was historically weak, according to the Australian Bureau of Statistics.

Read more »

Woman checking out new laptops.
Retail Shares

Are JB Hi-Fi shares still a buy as growth slows?

Is this stock worth a bargain basket buy?

Read more »

Young people shopping in mall and having fun.

I'd buy these ASX retail shares if economic fragility starts a fire sale

An economic hiccup could present a golden opportunity to buy these quality retailers.

Read more »