At the time of writing, the Wesfarmers Ltd (ASX: WES) share price was down 14% over the past month.
This comes at a time of when the S&P/ASX 200 Index (ASX: XJO) has only fallen by 2.6% over that same time.
What has happened in the last month that could possibly explain this decline?
Wesfarmers goes ex-dividend
Dividends and ex-dividend dates can have an impact on short-term business valuations.
An ex-dividend date is when a new shareholder is no longer entitled to the dividend. If an investor owns shares before the ex-dividend date then they are entitled to that dividend. If the investor buy shares on or after the ex-dividend date then they're not entitled to the declared dividend.
The Wesfarmers ex-dividend date was 1 September 2021. That means that new investors in September are not going to get the $0.90 per share final dividend. On 1 September 2021, the Wesfarmers share price actually fell around $2, or 3.3% in percentage terms.
There may also have been another catalyst. The diversified retail and industrial business reported its result and gave a trading update on 27 August 2021.
FY21 result
The actual FY21 report showed double digit growth for the company.
Excluding significant items, the continuing operations saw revenue rise 10% to $33.94 billion, earnings before interest and tax (EBIT) increased 18.8% to $3.78 billion and net profit after tax (NPAT) rose 16.2% to $2.42 billion. The underlying continuing earnings per share (EPS) also grew 16.2% to 214.1 cents.
Statutory profit, including the discontinued operations and significant items, rose by 40.2% to $2.38 billion.
There were two divisions that drove most of the increase in profit. Excluding significant items, Bunnings saw earnings before tax (EBT) increase 19.7% to $2.19 billion and Kmart Group EBT surged 69% to $693 million.
The above numbers and growth gave the board the confidence to increase the full year dividend by 17.1% to $1.78 per share.
The board has also decided it wants Wesfarmers to return capital to shareholders. The recommendation is a $2 capital return per share.
FY22 trading update
Whilst there was growth in FY21, the first weeks of FY22 saw a decline in sales.
Wesfarmers reported that in the 2022 financial year to date, Bunnings total sales were down 4.7%, Kmart and Target sales were down 14.3%, Catch's gross transaction value was down 8.5% and Officeworks sales were down 1.5%.
This may or may not be a key factor for investor thoughts about the Wesfarmers share price.
Management said sales in those retail divisions are being impacted by lockdowns and have required store closures and restricted trading in multiple regions.
However, there has been a variance in performance across regions. The company said that there was solid customer demand and trading results in areas less affected by lockdowns.
Not only are the sales being impacted, but there are also higher COVID costs relating to higher picking and fulfillment costs.
Looking at the biggest division, Bunnings, management said that solid growth from commercial customers has somewhat offset a decline in consumer sales as Bunnings is now cycling against strong demand in the prior period.
Management said that the retail divisions are well positioned for the resumption of normal trading as lockdowns and restrictions ease. It's going to continue to look for acquisition and expansion opportunities, whilst also developing its digital offering and efficiencies across the supply chain.
Is the Wesfarmers share price an opportunity?
Brokers aren't convinced it is yet. Analysts at UBS rate Wesfarmers as a hold, with a price target of $62.
UBS isn't sure that consumer demand will be as strong after the lockdowns as it was before these lockdowns in NSW and Melbourne.
At the current Wesfarmers share price, UBS believes that Wesfarmers is valued at 28x FY22's estimated earnings.
