Why is the Wesfarmers share price underperforming on Friday?

The market doesn't appear overly pleased with the company's AGM update.

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The Wesfarmers Ltd (ASX: WES) share price is having a subdued finish to the week.

In morning trade, the conglomerate's shares are down 0.5% to $50.11.

As a comparison, the ASX 200 index is currently up 0.35%.

Why is the Wesfarmers share price underperforming?

The weakness in the Wesfarmers share price today could be from a lukewarm response to the company's annual general meeting update yesterday afternoon.

According to the release, Wesfarmers' trading performance for the first 16 weeks of FY 2024 has generally continued in line with the update it provided with its full-year results in August.

Management advised that this means that Bunnings' sales growth remains in line with the second half of the 2023 financial year, with growth in both consumer and commercial segments. It adds:

While consumers continue to demonstrate a degree of caution in making big-ticket purchases, demand for products that support necessary repair and maintenance and smaller scale projects remains robust, and Bunnings has seen increased foot traffic to stores through the year-to-date.

Over at the Kmart Group, management advised that its strong financial results have continued. This is being underpinned by the market-leading value credentials of its Anko products, which have been resonating with an increasingly wide cross-section of households. It said:

With many customers remaining focused on how to manage ongoing cost-of-living pressures, Kmart is well positioned to extend its low-price leadership and profitably grow its share of customer spending.

Elsewhere, Officeworks' sales for the year-to-date are broadly in line with the prior corresponding period. However, the cost of doing business has increased through the year to date. As a result, Officeworks is focusing on delivering productivity and efficiency benefits to mitigate these pressures.

Over at the Catch business, its losses have continued to improve. This is being driven by changes to its range and cost structure to support a more profitable proposition.

In the Health division, sales growth in Priceline has been supported by continued demand for health and beauty products, but sales have moderated in the Wholesale and Clear Skincare businesses. The divisions' earnings have also been impacted by accelerated investment in transformation activities, PBS changes, and integration costs associated with acquisitions.

What about its industrial businesses?

Management notes that in the Chemicals, Energy and Fertilisers division, its strong operating results have continued. However, the division's earnings are expected to be significantly lower this year due to a lower global ammonia price and higher West Australian gas costs.

One positive is that this financial year the company expects to see its first earnings and cashflows generated from its lithium business.

Over at the Wesfarmers' Industrial and Safety division, it has recorded solid revenue growth for the year-to-date. But once again, earnings have been impacted by ongoing margin and cost pressures.

Wesfarmers chair, Michael Chaney, concludes:

While overall economic conditions will continue to present both opportunities and challenges, I'm confident that Wesfarmers is well positioned for the current environment and for the long term. I'm pleased with how the portfolio is positioned, providing us with a great platform for value creation, through a balance of resilience and growth. And our balance sheet is strong, providing flexibility to invest in our existing businesses and to pursue transactions that create value for shareholders over the long term.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. 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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