Wesfarmers share price in focus as revenue jumps 27%

The company has boosted its interim dividend on the back of strong first half earnings.

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Key points

  • The Wesfarmers share price will likely be driven by the company's first-half earnings on Wednesday
  • The company revealed a 14% jump in profits for the period and upped its interim dividend by 10%
  • It came as earnings at Kmart more than doubled while Catch posted a $108 million loss 

The Wesfarmers Ltd (ASX: WES) share price could be in for a big day after the company posted its earnings for the first half of financial year 2023 this morning.

Stock in the conglomerate behind Bunnings, Kmart, and Officeworks last traded at $48.70.

Wesfarmers share price on watch as dividend boosted

  • $22.56 billion of revenue – a 27% improvement on that of the prior comparable period (pcp)
  • $1.38 billion of net profit after tax (NPAT) – a 14.1% increase
  • $2.16 billion of earnings before interest and tax (EBIT) – up 13.4%
  • Basic earnings per share (EPS) came to $1.223 – a 14% jump
  • 88 cent per share interim dividend declared – up 10% on last year's
  • Ended the period with a $4.72 billion net debt position

What else happened last half?

Looking at the company's headline businesses, Bunnings saw revenue lift 6.3% to $9.79 billion last half while its EBIT increased 1.5% to $1.28 billion.

Meanwhile, Kmart Group (which includes Target) posted $5.71 billion of revenue – a 24.1% increase – while its EBIT more than doubled to $475 million.

At Officeworks, revenue jumped 4.5% and EBIT increased 3.7% to $1.65 billion and $85 million respectively.

Much of the group's notable revenue jump came from Wesfarmers Health. It was acquired in March 2022 and brought it $2.78 billion in revenue and $27 million in earnings last half.

Over at Wesfarmers Chemicals, Energy and Fertilisers (WesCEF), revenue jumped 30.2% to $1.4 billion while EBIT lifted 48.6% to $324 million. The company's industrial and safety business, meanwhile, posted a 4.5% jump in revenue, coming in at $978 million, while EBIT increased 14.6% to $47 million.

However, sales at Catch softened, leading the business to report a $108 million loss. That included $33 million of restructuring costs.

Finally, first ore was mined and stockpiled at the company's Mt Holland lithium project in December.

What did management say?

Wesfarmers managing director Rob Scott commented on the news likely to drive the company's share price today, saying:

The retail businesses benefitted from their well-established value credentials and omnichannel offer as customer shopping behaviours began to normalise, and WesCEF's continued strong operating performance enabled it to capitalise on favourable commodity price conditions.

Growth across the retail businesses also reflected the impact of COVID-related lockdowns in the prior corresponding period.

The disappointing financial performance in Catch reflected operational and execution challenges in addition to the broader decline in online retail demand during the period.

What's next?

Looking forward, the company believes its retail businesses are well-positioned to meet changing customer demand and mitigate rising costs amid surging inflation and higher interest rates.

Its retail trading results for the first five weeks of 2023 were broadly in line with the first half's growth, supported by strong growth in areas most impacted by COVID-19 disruptions in early 2022. Meanwhile, WesCEF is tipped to keep benefiting from strong commodity prices in the second half.

Wesfarmers expects its full-year capital expenditure to come in between $1 billion and $1.2 billion.

Wesfarmers share price snapshot

The Wesfarmers share price has performed in line with the S&P/ASX 200 Index (ASX: XJO) so far this year.

Both the stock and the index have gained 7% year to date.

However, Wesfarmers shares have fallen 11% over the last 12 months. Meanwhile, the ASX 200 has lifted 3%.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 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. 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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