Owning Wesfarmers Ltd (ASX: WES) shares means owning various high-quality businesses, including Bunnings, Kmart and Officeworks.
Bunnings is by far Wesfarmers' most important business because of the earnings it generates.
In FY24, Bunnings contributed 60% ($2.25 billion) of the company's divisional earnings. That compares to Kmart Group, the second-largest earnings engine, which contributed 25.5% ($958 million) of the total FY24 earnings.
But it would be a mistake to believe that Bunnings is now so big that it's too operationally mature to have any growth plans left.
Multiple growth avenues
Bunnings leader Mike Schneider recently spoke to the Australian Financial Review about where he sees the next opportunities for the retailer.
The hardware business is not looking to do one single major growth push, but rather take a number of smaller steps to deliver growth. It has learned its lesson from the expensive attempt to establish a presence in the UK.
Bunnings has recently expanded in the categories of pet goods and cleaning products.
The huge retailer is planning to get back into basic automotive products, according to the AFR's reporting. Bunnings originally had an auto products category when the warehouse retailing style was launched in 1994. Schneider said Bunnings is not going to try to match the amount of product choices of Repco and Super Retail Group Ltd's (ASX: SUL) Supercheap Auto.
Bunnings is looking to sell chargers and cabling for electric vehicles as the number of vehicles in the country increases. Schneider believes there will be demand for a range of more affordable options.
The third growth area for Bunnings is tools. It's refreshing its tools area, which will make it easier to shop by brand.
Fourth, Bunnings is going to adjust the products sold by rural and regional stores to offer more of what shoppers in those locations want, such as water storage, feed storage and fencing.
The fifth growth area relates to Bunnings recently becoming accredited under the NDIS, which will help it sell products used to modify buildings for assisted living for disabled and elderly consumers.
The last growth area is to offer a smaller range of in-demand products at the smaller-format Bunnings stores.
According to the AFR, analysts at Macquarie think Bunnings' sales could rise 2.5% in FY25 and 3.1% in FY26, thanks to the expansion in pet and cleaning products.
Time will tell how successful these growth efforts are.
Wesfarmers share price snapshot
The chart below shows that the Wesfarmers share price has climbed over 20% since the start of 2024.
