Wesfarmers Ltd (ASX: WES) shares are trading in the green in Wednesday afternoon trade. At the time of writing, the shares are up 3.8% to $77.12.
It's welcome news for investors after the retail conglomerate fell out of favour this year. The leading Australian blue-chip company has been smashed by global volatility.
After initially climbing 9% through the first few weeks of the year, Wesfarmers shares have crashed nearly 18% through to early April.
While the shares have climbed higher again today, they're still down 5.7% for the year to date and 12.7% lower than six months ago.
The sell-off of such a major blue-chip ASX stock prompts the question, why is everyone selling their Wesfarmers shares?
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1. Inflation concerns
Concern about inflation rates and the rising cost of living has smashed the retail giant's shares recently. Higher food, fuel, rent, and mortgage costs for an undetermined amount of time mean consumers are tightening their spending habits and cutting back on discretionary spending.
While Wesfarmers has broad retail operations across several markets, its key subsidiaries include household names such as Bunnings Warehouse, Kmart Australia, Officeworks, and Priceline.
Lower sales volumes across discretionary businesses translate to a weaker outlook. And that can dampen investor confidence.
2. Its latest results missed expectations
The blue-chip company posted its H1 FY26 results in mid-February, where it revealed a 3.1% increase in revenue, a 9.3% hike in NPAT, and an 8.4% rise in EBIT. It also announced a 7.4% increase in its fully-franked interim dividend.
On paper, the result looks good, but investors weren't impressed, and many quickly sold up their shares. By the end of the day, the stock had tumbled 5.6%, and it kept going through to late March.
3. Concerns that share price growth has peaked
Analysts are mostly bearish on Wesfarmers shares. TradingView data shows that seven out of 16 analysts have a sell or strong sell rating on the stock, and another seven have a hold rating.
The average target price, however, is $80.36, which implies a 4% upside at the time of writing.
4. Profit talking after a share price rally
While there are several reasons that investors could have fallen out of favour with Wesfarmers shares, it's also possible that a lot of this year's sales are down to investors taking their gains off the table after a strong rally.
The company's shares spiked to $89.25 in mid-Feb, up 9.2% over the first six weeks of the year.
5. Market-wide rotation
Looking more broadly, the Australian sharemarket has undergone a broad-based sell-off and rotation over the past couple of months after market volatility and concerns about the US-Iran war worried stressed-out investors.
There was an overall shift from retail-heavy stocks like Wesfarmers into energy and defensive assets in order to ward off some volatility.
