There are very few ASX blue-chip shares that I think are better suited to the current environment than the owner of Bunnings and Kmart. Considering how far the Wesfarmers Ltd (ASX: WES) share price has dropped over the last few months, as the chart below shows, I think this is the right time to buy.
Without a crystal ball, there's no knowing what's going to happen next. It could bounce back, keep falling or tread water from here.
We can only judge the business based on the current valuation and its prospects. I'm optimistic at the current valuation because of a few different reasons.
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Strong value credentials
At the moment it's looking as though there's going to be another bout of inflation in 2026, unfortunately.
In that environment, I think it'd be useful to look at which businesses succeeded.
The biggest profit generators inside Wesfarmers are Bunnings and Kmart, which pride themselves on giving consumers great value. They've captured market share since the start of COVID-19 and I expect they can continue to gain further market share in this environment.
Additionally, I believe the expansion of Anko products into overseas markets, such as the Philippines, opens up a much larger opportunity for Kmart Group to grow earnings in the long-term.
Great return on equity
One of the best measures of a company's quality is its return on equity (ROE).
That metric tells us how much profit a business makes compared to how much shareholder money a business is retaining. Obviously, shareholders want the business to earn a strong return on money that isn't being paid out as a dividend.
Wesfarmers reported in its FY26 half-year result that its ROE was 32.7%. That's high for a retailer and it was higher than HY25's ROE of 31.2%. Increases are a great sign of a rising quality of the Wesfarmers share price.
Earnings diversification
One of the best reasons to like the Wesfarmers share price is because of the chemicals, energy and fertiliser (WesCEF).
I think it's possible that the chemicals and fertiliser segments could see rising earnings in the coming years.
I'm particularly excited by the company's growing exposure to lithium mining which the company has with its exposure through the Mt Holland project. The mine and concentrator performed well during the FY26 first-half result, with production reaching nameplate capacity.
Excitingly, lithium pricing significantly improved in the second quarter of 2026, supported by strong demand for battery energy storage systems (BESS) and supply constraints.
I like how the business is diversifying its operations and adding to its earnings growth avenue. It's a great time to own exposure to lithium mining.
According to the forecast on CMC Invest, at the time of writing, the Wesfarmers share price is valued at 27x FY27's estimated earnings.
