Why is the Wesfarmers share price slipping today?

Wesfarmers maintains a strong credit rating as it increases capex on digital investments and the Mt Holland lithium project.

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Key points

  • Wesfarmers share price dips on open
  • Wesfarmers is holding a strategy briefing in Sydney today
  • The Group will increase spending on the development of its Mt Holland lithium project

The Wesfarmers Ltd (ASX: WES) share price is slipping in early trade, down 0.6%. This comes as the S&P/ASX 200 Index (ASX: XJO) also sliding into the red, down 1.0%.

Wesfarmers shares closed yesterday at $47.58 and are currently trading for $47.29.

The ASX 200  conglomerate – whose portfolio includes household names like Kmart, Target, Officeworks and Bunnings Warehouse – is holding a strategy briefing day in Sydney today.

Here are some of the highlights.

Wesfarmers share price dips amid strategy briefing

The Wesfarmers share price is dipping into the red alongside the broader benchmark in the midst of today’s corporate presentation.

With ecommerce is continuing to grow across Australia, the retail conglomerate, with more than 1,500 physical stores, said it’s continuing to expand its digital offerings. It established Wesfarmers OneDigital in the second half of the 2022 financial year and is now offering its OnePass membership program to Kmart and Target customers.

Wesfarmers reported its online sales are up three times compared to levels in the first half of 2019, with more than 150 million online interactions per month.

On the growth front, Wesfarmers will continue to focus on developing Bunnings, its biggest revenue generator, as well as investing in growing and improving the performance of API and its new Health division.

The company is also expanding WesCEF through its Mt Holland lithium project, located in Western Australia. Its increasing spending to approximately $320 million on development of the Mt Holland lithium project.

Focusing on the environment, WesCEF – a portfolio of businesses supplying products to critical industries – has a new sustainability focus including a commitment to achieving net zero emissions.

With both the waning pandemic and waxing inflation in mind, Wesfarmers reported it “is well positioned for the post-COVID environment, having strengthened the capabilities of existing divisions and with new platforms for future growth”.

“Wesfarmers’ retail divisions are well equipped to manage inflationary pressures and view this as an opportunity to profitably grow share while extending value credentials.”

Inventories and capex higher

Wesfarmers reported “abnormally high” inventory levels in the first half for the 2022 financial year. This was due to its decision to temporarily hold more stock, domestic supply chain disruptions, and higher commodity prices.

Looking ahead, the company expects inventory levels to normalise in time, but these are likely to remain elevated in 2H FY22 due to “API, inflation and commodity price impacts, and ongoing prioritisation of stock availability”.

Capital expenditure is increasing with more money flowing into the Mt Holland lithium project, alongside increased digital and network investments. Net capex is forecast to come in the range of $900 million to $1.0 billion.

Wesfarmers maintains a strong credit rating, with Moody’s rating it A3 (a stable outlook) and Standard & Poor’s rating it A- (also a stable outlook).

Wesfarmers share price snapshot

The Wesfarmers share price has struggled this year, down 22% since the opening bell on 4 January.

By comparison, the ASX 200 is down 6% year-to-date.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

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