The Wesfarmers Ltd (ASX: WES) share price has been through plenty of volatility this year. Are things going to pick up in October and beyond?
Well, October has already started with a bang as investors regained a little bit of confidence about the economic situation.
In the month to date, the Wesfarmers share price has risen over 4% and the S&P/ASX 200 Index (ASX: XJO) is also up by more than 4%.
What could impact the Wesfarmers share price in October and the coming months?
It's hard to get away from inflation. There are a whole bunch of different impacts on the ASX retail share. Higher costs are being seen in areas like rent, wages, products and the supply chain.
Wesfarmers pointed out in its FY22 result that the Australian economy is starting from a strong base with low unemployment and high levels of household savings.
The company is actively managing inflation, "leveraging its scale and sourcing capabilities to mitigate the impact of cost increases."
In fact, management thinks that many of Wesfarmers' businesses can excel during this period as they offer strong value for customers. The company said:
The group's retail businesses are well positioned as cost of living pressures impact household budgets and value once again becomes increasingly important to customers. The retail businesses will maintain their focus on meeting the changing needs of customers and delivering even greater value, quality and convenience. This will be supported by continued investment in divisional data and digital capabilities, as well as the additional growth and efficiency benefits provided through OneDigital.
I think that one of the main things that will impact the Wesfarmers share price movement over the next month is the upcoming annual general meeting (AGM) on 27 October 2022. This is a meeting of shareholders where management gets to review what has happened and tell investors about its plans for the future. Plus, it's likely to give a trading update. Investors will, perhaps unfairly, substantially judge a business on how its most recent sales have performed.
Sales can obviously have a large influence on how much net profit after tax (NPAT) the company generates as well.
Latest trading update
In the Wesfarmers outlook statement for FY23, the company told investors how trading had gone in the first seven weeks of the new financial year. It said:
Sales growth has been particularly strong in Kmart Group, with sales significantly higher on both a one-year and two-year basis. Bunnings also continues to see positive sales growth, on a one-year and two-year basis. Sales in Officeworks were in line with the prior year.
The performance of the group's industrial businesses remain subject to international commodity prices, foreign exchange rates, competitive factors and seasonal outcomes. WesCEF is expected to continue to benefit from elevated commodity prices and will continue to evaluate capacity expansion opportunities for its existing operations, and progress the development of the Mt Holland lithium project.
Wesfarmers can benefit in the first half of FY23 from the fact that retail stores aren't being locked down. A year ago, Victoria and NSW stores were under restrictions. This will help the year-over-year growth rate.
I'll highlight what was said about Bunnings because it generates the lion's share of Wesfarmers' profit. It said that there is still a "solid pipeline of renovation and building activity". Bunnings is looking to do things like grow its online sales and deepen its relationship with commercial customers.
Opinions on Wesfarmers shares
I think that the Wesfarmers share price is attractive after dropping 25% in 2022 to date as it grows and diversifies its portfolio. Bunnings is a great business, in my opinion, and earning strong returns on shareholder money.
One of the brokers that rates the ASX retail share as a buy is Morgans. It has a price target of $55.60 – that's suggesting that Wesfarmers shares could rise 25% over the next year. The broker thinks it's a good long-term investment.
