What went wrong for the Wesfarmers share price in May?

Wesfarmers had a shocker last month. Let’s see why…

| More on:
A frustrated young woman shopper holds her hands up with a pained, annoyed expression on her face as she stands next to her trolley in a grocery store and examines the stock offerings on the shelf in front of her.

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

Key points

  • Wesfarmers didn't have a pretty month over May
  • The retailing conglomerate even underperformed the ASX 200 Index
  • So let's see what a US retailing slump had to do with it...

Welcome to June and winter. Since it is the first day of a new month (and season in this case), it’s a good opportunity to reflect on the month that was, and see how some of the ASX’s most prominent shares fared. So today, let’s examine why the ASX 200 retail and industrial conglomerate Wesfarmers Ltd (ASX: WES) share price had such a dreary month last month.

Wesfarmers shares had a painful May, no way around it. The company began May at $49.41 a share, but finished up yesterday at a price of $47.19 apiece. That represents a one-month fall of 4.49%. Not that the S&P/ASX 200 Index (ASX: XJO) had a good month, mind you. The ASX 200 lost 3.01% over the same period. But still, that makes Wesfarmers a market-losing ASX share over the month just gone.

So what went wrong for Wesfarmers over May? Well, it’s not entirely clear. Wesfarmers released no major news, reports, or announcements over the month.

Why were ASX investors taking the Wesfarmers share price to the cleaners in May?

However, we can point to one event that may have dictated this miserly May performance. On 19 May, the Wesfarmers share price was smashed, falling almost 8% in one day. This was devoid of any company-specific news. However, it did coincide with similar moves across the ASX retail space.

As my Fool colleague Brooke dug into at the time, this sector-wide rout “[seemed] to have been spurred by United States retail monoliths Target Corporation (NYSE: TGT) and, to a lesser degree, Walmart Inc (NYSE: WMT)”.

At the time, Target (the US retailer, not the Wesfarmers subsidiary) had just dropped a disappointing quarterly earnings report. This contained a revelation that the company’s earnings per share (EPS) had dropped a staggering 48%. Walmart had also given its own investors a disappointing update the day before that.

Most US retailers were sold off heavily on this news, with the pessimism spilling over the Pacific to the ASX and our own ASX retail sector. After this mid-month drop, the Wesfarmers share price did recover somewhat. But it wasn’t enough to stem the losses from that one-day shocker. As such, this seems to be the primary reason why the Wesfarmers share price underperformed the ASX 200 over May and delivered investors such a miserly return.

At the last Wesfarmers share price, this ASX 200 retailer had a market capitalisation of $53.51 billion with a dividend yield of 3.6%

Motley Fool contributor Sebastian Bowen has positions in Walmart Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Target. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retail Shares

Confused baby.
Earnings Results

‘Our future is looking bright’: Baby Bunting share price slips despite earnings milestone

The company's total sales surpassed $500 million last financial year.

Read more »

A woman sits on sofa pondering a question.
Retail Shares

Down 20% since March, is this ASX 200 share a misunderstood investment opportunity?

This embattled stock might present a buying opportunity, according to this fundie.

Read more »

Woman checking out new iPads.
Retail Shares

What’s impacting ASX 200 retail shares today?

What is the latest consumer data showing?

Read more »

retail shares wesfarmers
Retail Shares

What are you getting when you buy Wesfarmers shares on the ASX today?

What's really under the hood of a Wesfarmers share?

Read more »

A customer and shopper at the checkout of a supermarket.
Broker Notes

3 reasons this broker says Woolworths shares are a strong buy

Here's why Woolworths could be a strong buy...

Read more »

A banker uses his hands to protects a pile of coins on his desk, indicating a possible inflation hedge
Retail Shares

The retailer that’s a ‘recession-proof’ ASX share to buy: analyst

Australians now have far less to spend with the mortgage taking up more of their budget. So which retail business…

Read more »

person sitting at outdoor table looking at mobile phone and credit card.
Retail Shares

Is it time to buy these 2 beaten-up ASX shares in August?

E-commerce ASX shares have been hit hard this year. Are these names buys?

Read more »

A woman holds out a handful of Australian dollars.
Dividend Investing

‘Extremely well run’: 1 ASX dividend share this fundie just topped up on for FY23

Perpetual’s Jack Collopy says the fund manager has added to its positions of Nick Scali heading into the 2023 financial…

Read more »