Wesfarmers Ltd (ASX: WES) shares managed to avoid the market weakness on Thursday.
The conglomerate's shares edged ever so slightly higher after investors responded positively to its Bunnings investor day event.
The team at Goldman Sachs has also responded positively to the update and picked out three key takeaways from the presentation.
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3 key takeaways from the Bunnings investor day
The first key takeaway is that Bunnings sees a significant opportunity to use its space better to drive higher sales per square metre. Goldman said:
Bunnings highlighted a double digit growth opportunity in its sales/sqm with its key US peers delivering sales/sqm that is 1.5-2.1x relative to Bunnings. Management highlighted 8 new categories (incl Pets, Automotive, Smart Home, Cleaning) that are sales/sqm and GP/sqm accretive. […] At the same time, Bunnings will continue to offer range breadth by leveraging marketplace for lower turn and less core categories such as bed and bedding.
Another takeaway for investors to take note of is its differentiated category entry strategy. The broker explains:
Bunnings plans to build entry into the new categories through range and value differentiation including securing lead brands (e.g. OMO for cleaning and Pedigree for Pet) and own brands at entry prices.
A third key takeaway relates to its continued push of commercial sales. Goldman adds:
38% of Bunnings sales in 1H25 (vs ~35% in 1H21) and has a diversified customer group of 30%/45%/25% builders/trades/organisations. Bunnings has stepped up its services proposition including on site specialists, online specialists help line, on site delivery and more targeted offers on PowerPass loyalty.
Should you buy Wesfarmers shares?
According to the note, the broker has reaffirmed its buy rating and $80.40 price target on Wesfarmers' shares.
Based on its current share price of $72.12, this implies potential upside of 11.5% for investors over the next 12 months.
Commenting on its buy recommendation, the broker said:
We have a buy recommendation for WES based on 1) Bunnings market share gain against soft operating backdrop 2) Bunnings long term growth options in sales/sqm and Retail Media. 3) Portfolio management sees Lithium/Health scaling to deliver double digit EBIT growth in FY26. WES in our view is undervalued relative to these growth prospects. We are Buy rated on the stock.
All in all, this could make Wesfarmers a good option if you are looking for blue chip additions to your investment portfolio.
