Many investors may have heard of Wesfarmers Ltd (ASX: WES) stock. After all, it's the company behind popular Australian names like Kmart, Bunnings, Officeworks and many other businesses.
I think it has proven to be one of the most effective ASX blue-chip shares to own over the long-term. Wesfarmers has been especially effective at growing its businesses to be some of the leaders in the country at what they do.
But, there's much more to Wesfarmers stock than just owning large retail businesses with a strong focus on value products. Let's get three things that make it very compelling.
High return on equity
One of the best ways to measure the quality of a business is with its return on equity (ROE). That tells us how much profit it's making compared to the amount of shareholder money that is retained within the business.
It's great to see a high ROE percentage because that shows how effective the company has been at using shareholder funds to grow the business.
I think the ROE is particularly useful to see how much a return (in percentage terms) additional retained profit could make for the company. Retained profit should help send Wesfarmers stock higher in the long-term as it's utilised.
The business reported that in the 2025 financial year its underlying ROE was 31.2%. If Wesfarmers can continue earning a ROE of at least 30% as it becomes bigger, it has a very promising future for profitable growth.
Kmart's global plans
Kmart is already an impressive business with a very strong retail presence in Australia thanks to its low-cost products which have improved in quality thanks to its increasing scale.
But, the company has unlocked another growth avenue for its Anko products – international markets. This could be the next major step for profitable growth.
It's selling furniture and home products in Canada and wooden toys in the US. Perhaps most excitingly, Anko is selling a broad general merchandise range in the Philippines through Anko stores. It currently has five Anko stores operating in the Philippines, with good prospects for more.
Big healthcare plans
Healthcare is a major sector of the Australian economy. I think Wesfarmers has a very promising outlook thanks to the businesses it already owns and how it can bring its scale and expertise. Over time, it could become an important contributor in Wesfarmers stock.
Some of the businesses it already owns include Priceline, skincare clinics and digital health (including InstantScripts).
In the FY25 result, the company said:
Wesfarmers Health is well positioned to improve long-term earnings and returns by capitalising on growing customer demand for health and wellness, and by executing its transformation program, which includes ongoing investment in systems and capabilities.
The focus is on growing share and scale in the higher-margin and less capital-intensive Consumer segment and improving performance in the Wholesale segment.
The outlook for growth in the division's profit looks positive with ongoing expansion of the Priceline network, expanding its range of exclusive brands and private label products, potential further acquisitions and the ageing demographics of Australia.
In ten years, I wouldn't be surprised if this was the third most important segment for Wesfarmers stock (behind Kmart and Bunnings).
