Wesfarmers Ltd (ASX: WES) shares have seen significant ups and downs in 2025 to date due to a growing trade war between the US and various countries. I don't know what's going to happen this week or even this year. However, share prices typically follow the direction of profit.
While the recent decline of the Wesfarmers share price (shown above) is a setback, investors may feel reassured if they can see the future is likely to be positive.
The owner of Officeworks, Bunnings and Kmart, recently reported its result for the FY25 half-year result and the broker UBS gave its latest forecasts for future revenue and profit after looking over the numbers. Let's start with the 2025 financial year.
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First, FY25
UBS noted that the result included total sales growth of 3.6%, operating profit (EBT) increased by 4.6%, and net profit after tax (NPAT) grew by 2.9%. The broker said the result was led by Kmart and WesCEF (chemicals, energy and fertiliser), though Bunnings was also "resilient".
UBS suggested that Wesfarmers shares justify a higher price-earnings (P/E) ratio compared to history because of an improving Bunnings growth outlook, Kmart resilience and strength, and a rising return on capital (ROC).
The broker believes Bunnings has underappreciated growth potential. UBS noted the hardware giant is growing its market share in existing categories and entering new categories. It's also growing its digital sales, which made up 6.3% of sales.
With Kmart, the company grew customer numbers, as well as units sold and transaction volumes, as it gained market share. UBS said it's benefiting from customers 'trading down' during this period of a high cost of living. Kmart is also benefiting from cost and efficiency initiatives.
After seeing that report, UBS increased its long-term earnings predictions for the retail divisions.
For FY25, UBS forecasts Wesfarmers could generate $45.8 billion in revenue and $2.7 billion in net profit.
Then, FY26
Profit growth could accelerate in the 2026 financial year, which could be good news for Wesfarmers shares.
The broker suggests the company's revenue could rise to $48 billion, and net profit could climb to $2.93 billion.
Next, FY27
The company could have an even stronger 2027 financial year with a possible profit growth of 11.5%.
UBS predicts that Wesfarmers will generate $50.5 billion in revenue and grow its net profit to $3.27 billion.
After that, FY28
The strong profit growth is projected to continue in the 2028 financial year.
UBS predicts that the owners of Wesfarmers shares could see the company make $53 billion in revenue and $3.6 billion in net profit.
Finally, FY29
The final year of this series of forecasts is projected to be the best one.
Broker UBS suggests that in the 2029 financial year, Wesfarmers could make $55.3 billion in revenue and $3.8 billion in net profit.
At the current Wesfarmers share price, the stock is valued at under 21x FY29's estimated earnings.
