Wesfarmers Ltd (ASX: WES) shares are among the most popular ASX blue chip investments on the S&P/ASX 200 Index (ASX: XJO) today. This ASX 200 industrial and retailing conglomerate is now the ninth-largest share on the ASX 200 index by market capitalisation.
But not only that, Wesfarmers is a prominent feature of the ASX retailing landscape through its proxies like Bunnings and Officeworks. Chances are most of us visit at least one Wesfarmers-owned store regularly.
But the vast number of underlying businesses, ownership stakes in businesses, and other assets Wesfarmers owns can make it hard to really understand what one is buying when a Wesfarmers share is purchased. So today, let's see what is under the hood of a Wesfarmers share.
So, as evidenced through Wesfarmers' last half-year report (delivered back in February), Wesfarmers likes to divide its earnings into six divisions. These are:
- Bunnings
- Kmart Group
- Officeworks
- WesCEF
- Industrial and Safety
- Other Businesses
Wesfarmers broken down
So the Bunnings and Officeworks divisions are self-explanatory, covering only the operations of the Bunnings Warehouse and Officeworks businesses.
Kmart Group includes the discount store chain Kmart. But also that of the fellow Wesfarmers-owned retailer Target.
Wesfarmers' fledgling Catch.com.au company used to be part of this group, but has recently been moved to a new division called 'Wesfarmers OneDigital'. This also includes the OnePass data business. We should see this new division broken down a bit more when Wesfarmers drops its next annual report.
WesCEF stands for Wesfarmers Chemicals, Energy and Fertilisers. Although it is a relatively small part of Wesfarmers' overall earnings base, WesCEF is a rather large collection of different businesses and interests.
These include the Covalent Lithium joint venture and the Kleenheat energy business. There are also CSPB Fertilisers and Ammonia, Ammonium Nitrate and Industrial Chemicals, Australian Vinyls and the Australian Gold Reagents joint venture.
Like WesCEF, Industrial and Safety is a collection of smaller underlying businesses and ventures. Among these is the Workwear Group, which owns clothing brands like King Gee, Wolverine and Hard Yakka. It also includes risk management company Greencap, tool maker Blackwoods and gas company Coregas.
Meanwhile, 'Other Businesses' is Wesfamers' division that houses the company's remaining 5% stake in Coles Group Ltd (ASX: COL).
It also is home to the company's 50% share of consumer loyalty company Flybuys, a stake in BWP Trust (ASX: BWP) and stakes in both financial services provider Gresham Partners and plantation company Wespine Industries.
What else does an investor get with Wesfarmers shares?
It's worth noting that since the release of Wesfarmers' half-year report, the company has finalised the acquisition of the old Australian Pharmaceutical Industries (API) business. API used to be listed on the ASX.
Wesfarmers now owns this pharmacy operator as well, which now forms the core of the company's new Health division. Again, we'll have to wait until Wesfarmers' next annual report to see how the earnings from this new division have bedded into the company's overall earnings.
So, Wesfarmers reported a total of $1.778 billion in earnings before tax for the six months to 31 December 2021. Of that $1.778 billion, Bunnings easily claimed the lion's share. The division came in with $1.259 billion in earnings.
In contrast, the Kmart Group recorded $178 million in earnings. Officeworks was $82 million, while WesCEF was responsible for $218 million. Industrial and Safety and Other Businesses were the smallest contributions, with just $41 million and $18 million in earnings respectively.
So as you can see, Wesfarmers is an enormously diverse company with many fingers in many pies. Saying that, its earnings base is still very much dominated by its flagship Bunnings business. This division contributed more than 70% of the company's overall earnings over the six months to 31 December.
But this is what you are getting with an investment into Wesfarmers shares on the ASX today. There's certainly a lot going on.
