The Wesfarmers Ltd (ASX: WES) share price is up 0.94% amid the company presenting its 2023 strategy briefing to the market. It's also updated investors on its healthcare acquisition battle.
Wesfarmers is the parent business of a number of divisions including OneDigital, Bunnings, Kmart Group, Officeworks, chemicals, energy and fertilisers (WesCEF), industrial and safety, and Wesfarmers Health.
The company has delivered an overview on the progress of each of its business segments. Readers are welcome to look at the 100-page presentation, but I'm going to cover some of the highlights Wesfarmers reported.
Addressing investors and analysts at the company's strategy day, Wesfarmers boss Rob Scott said the "honeymoon is very much over". He cited customers switching to value products amid the changing economic conditions, according to reporting by The Australian.
Scott also said the last few years "was also one of the only times in at least the last few decades" where "value wasn't as important for households". He attributed this to very high levels of accumulated savings and very low interest rates.
Of course, that economic environment has shifted.
Here's a rundown on the company's businesses:
OneDigital
Wesfarmers describes this segment as "data and digital capabilities that are complementary and incremental to retail businesses, generating value for customers and divisions".
It launched OnePass 12 months ago which has "rapidly grown the member base", according to Wesfarmers. The brand participation now includes Bunnings, Kmart, Target, and Catch.
This division is giving Wesfarmers "valuable customer insights" which, in turn, is helping develop omnichannel benefits. It's also using more AI to help its various divisions, such as Bunnings markdown optimisation.
OneDigital has "formalised" its relationship with Flybuys through a new partnership agreement. In the first half of FY24, it will also partner with another Wesfarmers business Officeworks. This is expected to deliver new in-store benefits, an enhanced delivery offer, and expanded rewards and benefits.
Wesfarmers' online shopping business Catch falls within the OneDigital division. Catch is showing month-on-month reduction in losses as well as an improvement in the customer net promoter score (covering loyalty and enjoyment). The online shopping business is aiming to focus on profitable items and optimise its marketing spending.
Bunnings
Wesfarmers' core Bunnings business has been boosted by "specialist formats" to complement its main store offerings. It wasn't that long ago that Bunnings acquired Tool Kit Depot and Beaumont Tiles. It is currently expanding their retail networks to provide a national offering.
Bunnings also noted its involvement with supplying prefabricated frames and trusses which, it says, gives it early access to building plans. It's currently "introducing automation to improve productivity".
Meantime, its hardware division is driving down costs through increased productivity. According to the business, being more efficient and lowering costs enables stronger profitability for Wesfarmers and ensures the "lowest prices" for customers.
The Bunnings segment is key for Wesfarmers shares because it generates the largest portion of the company's profit.
Kmart Group
This division includes both Kmart and Target.
It's looking to extend its low-price leadership and grow its share of wallet by leveraging product development and enhancing its 'omnichannel' focus, meaning in-store or online. To drive this, the business will concentrate on "loyalty and personalisation".
Kmart Group is digitising store and online operations to "further reduce costs and convert revenue growth into profit growth", Wesfarmers said.
It's also exploring "new and profitable channels" which involve expanding Kmart's Anko brand into new markets globally. Wesfarmers says Anko's general merchandise offer is "globally competitive and underpinned by value-adding capabilities".
Anko has launched in Canada through an agreement with retailer Hudson Bay Company and a store-in-store concept within Canadian discount chain Zellers (both online and in-store).
WesCEF
While WesCEF works across a number of different areas, it's the Mt Holland lithium project that's getting a lot of attention. Wesfarmers is in a joint venture with Covalent Lithium Pty Ltd to develop the project in Western Australia.
Wesfarmers reported construction of the project's concentrator is "over 90% complete with early commissioning underway". Refinery civil works are also "complete and the majority of procured equipment has arrived in WA".
Wesfarmers said Covalent is "continuing to manage a challenging construction environment", but the timing and capital expenditure "remains in line" with the guidance given in February 2023.
It has executed agreements for lithium hydroxide offtake with tier-1 customers. Wesfarmers said the project continues to be supported by strong market fundamentals.
Of course, this division's earnings remain subject to global commodity prices, Wesfarmers added.
Wesfarmers Health
Finally, Wesfarmers Health's main business is Australian Pharmaceutical Industries, which owns Priceline and Clear Skincare Clinics. Certainly, the company's healthcare division could drive Wesfarmers shares as it grows.
It has been looking at acquisitions. However, we learned this morning that Wesfarmers is not going to match EC Healthcare's bid for Silk Laser Australia Ltd (ASX: SLA), though Wesfarmers continues to conduct due diligence.
Wesfarmers is "actively pursuing growth opportunities across digital health, medical aesthetics and wholesale pharmaceutical markets to deliver long-term profitable growth". It's reported it could be interested in buying online telehealth provider InstantScripts, according to the Australian Financial Review.
Certainly, time will tell whether Wesfarmers Health makes any more acquisitions in 2023.
