Wesfarmers CEO thinks lockdowns will soon do more harm than good.
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The Wesfarmers Ltd (ASX: WES) share price has slipped to a 1-month low. This comes as prolonged lockdowns weigh on the diversified conglomerate.
Wesfarmers CEO Rob Scott told the Australian Financial Review (AFR) that it might be time to take a different approach instead of being “fully open or fully shut”.
What did Wesfarmers’ CEO say?
Scott argued for a “more considered plan for the reopening of certain sectors under COVID-safe conditions and easing of some community restrictions, including greater freedoms for those who are vaccinated.”
He flagged that continued lockdowns in New South Wales and Victoria would eventually lead to a point where the “benefits of those lockdowns are outweighed by the broader harm that’s being done.”
About Wesfarmers, Scott said, “We’ve got nearly one in 10 workers in Sydney stood down without pay.”
We are seeing mental health issues skyrocket – particularly in the under-30s. We are seeing small businesses and even large businesses under enormous stress. There comes a tipping point where all of this harm being done by lockdowns is worse than the problem we are trying to solve.
Wesfarmers share price slides to month low
The Wesfarmers share price was trending strongly in August, briefly rallying to an all-time high of $67.20 on 20 August.
The record high was short-lived as Wesfarmers shares closed last Thursday at $63.96 – the day before its FY21 results announcement.
Wesfarmers shares fell 2.75% to $62.20 on Friday. That’s after the company flagged the effect of recent COVID-related lockdowns on its retail divisions.
Bunnings sales for the first 7 weeks of FY22 had declined by 4.7% on the prior corresponding period (pcp). Officeworks sales had also slumped 1.5% on the pcp. While combined Kmart and Target sales for the first 8 weeks of FY22 tumbled 14.3% on pcp. Almost 50% of Kmart and Target stores were forced to close by mid-August.
Management warned that:
Given the impact of lockdowns in recent months and the prospect of continued trading restrictions, earnings in the Group’s retail businesses during the first half of the 2022 financial year may be below the prior corresponding period.
At the time of writing, Wesfarmers share price is down another 3.2% to a low $60.21.
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.