The Wesfarmers Ltd (ASX: WES) share price reached an all-time record high today, touching $51.29 this afternoon. Let’s take a look.
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The Wesfarmers Ltd (ASX: WES) share price reached an all-time record high today, touching $51.29 this afternoon before retreating slightly to $51.12, up 3.09% at the time of writing.
The company’s share price has been on fire since March, when it fell to a 52-week low of $29.75 during the height of the coronavirus pandemic.
The shares have since rebounded strongly and steadily, gaining more than 70% from the March lows.
What’s been driving the Wesfarmers share price?
The Wesfarmers conglomerate has performed well this year despite pandemic-related challenges, with the company announcing in November that sales continued to grow in fiscal-year 2021 after a strong second-half in 2020.
At the time, the company reported that its retail businesses continued to grow higher than pre-coronavirus levels.
The key Bunnings business is the star of the show, with sales up 25.2% over the prior corresponding period. The K-mart business also performed well despite widespread store closures, delivering 3.7% sales growth year to date.
Meanwhile, the company’s Officeworks business continued its strong form and reported year to date sales growth of 23.4%, supported by strong demand for technology and home office furniture products.
More about Wesfarmers
Wesfarmers is arguably Australia’s best-known conglomerate. The company earns around 80% of revenue from its flagships Bunnings, K-mart, and Officeworks – with Bunnings earning half of the group’s revenue.
Through Bunnings, Wesfarmers has the largest market share (25%) in a highly growing home improvement sector. Meanwhile, K-mart and Target stores combined have the largest market share in the discount department store sector.
Bunnings’ scale in particular generates bargaining power with suppliers when sourcing products, and when negotiating rents with landlords. Compared with other retail categories, analysts say that home improvement players have some defences against the encroachment of e-commerce. This is because the sizes and weights of products purchased at home improvement stores prohibit cost-effective shipping. In addition, the specialised knowledge that its employees offer in-store is difficult to replicate online.
In its industrials business, Wesfarmers is also on the verge of making a big bet on lithium. Specifically, it’s about to make a decision in early 2021 whether to invest in building a plant in Kwinana WA, that would process lithium from its Mount Holland project owned jointly with Chilean miner Sociedad Quimica y Minera.
Wesfarmers share price compared to competitors
The Wesfarmers share price has gained 24% in 2020. This compares with Coles Group Ltd (ASX: COL) share price which has so far risen by 22% year-to-date. Meanwhile, the Woolworths Group Ltd (ASX: WOW) share price has only risen by 8% during the same period.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.