Wesfarmers Ltd (ASX: WES) shares are under selling pressure today.
Shares in the S&P/ASX 200 Index (ASX: XJO) retail stock – whose subsidiaries include global household names like Bunnings Warehouse, Kmart Australia, Officeworks and Priceline – closed yesterday trading for $77.20.
In late morning trade on Thursday, shares are changing hands for $73.81, down 4.4%.
For some context, the ASX 200 is down 0.6% at this same time.
This underperformance follows the release of Wesfarmers' financial results for the full year ended 30 June (FY 2024).
Why are Wesfarmers shares under pressure today?
With Wesfarmers shares having soared 37.5% over the past 12 months, even taking today's slide into account, investor expectations for the ASX 200 retail giant are high.
And by and large, the company didn't disappoint.
Highlights included a 1.5% year-on-year increase in revenue to $44.2 billion and net profits up 3.7% from FY 2023 to $2.56 billion.
Bunnings was a particularly strong performer, with revenue coming in at $18.97 billion, up 2.3% year on year.
This all led to a pleasing outcome for passive income investors, with the board declaring a final fully franked dividend of $1.07 a share. That's up 3.9% from the prior final dividend. And it brings the full-year payout to $1.98 a share.
At the current share price, that equates to a fully franked dividend yield (part trailing, part pending) of 2.7%.
As for the year ahead, management said, "Wesfarmers remains focused on long-term value creation and continues to invest to strengthen its existing businesses and develop platforms for growth."
So, why are Wesfarmers shares dropping today?
Why the selling pressure?
Well, investors may have some doubts about the medium-term benefits of the company's lithium investments.
Wesfarmers forecasts the first lithium production from its Kwinana refinery in mid-2025. But with the price of the battery-critical metal widely expected to remain depressed through 2025, margins may be quite tight here for some time.
Then there's Bunnings' strong performance and market dominance. This may actually be a mixed blessing for Wesfarmers shares, according to Farhan Badami, market analyst at eToro.
"Bunnings, the company's flagship hardware store, continued to be the star of the show," Badami said.
Badami added:
However, Bunnings could be getting too big for its boots, with growing talks of a government inquiry looking into how it deals with customers and suppliers.
This is a similar story to what we've seen in recent times with major supermarkets, and this could prove to be a headache for one of Australia's largest retailers down the track.
