From all-time highs to 2-month lows, what happened to the Wesfarmers share price?
The post Why the Wesfarmers (ASX:WES) share price is down 9% in the last week appeared first on The Motley Fool Australia. –
Shares in the diversified conglomerate have quickly deteriorated from all-time highs of $67.20 on 20 August to a $57.82 close on Thursday.
Why the Wesfarmers share price sliding
Moderating sales growth
Wesfarmers delivered a well-rounded FY21 result as revenues increased 10% to $33,941 million and net profit after tax (NPAT) excluding significant items rose 16.2% to $2,421 million.
Despite a strong overall FY21 performance, Wesfarmers’ flagged that growth began to moderate towards the end of the financial year following government-mandated lockdowns and the cycling of elevated FY20 sales.
According to the company’s FY21 results announcement, “Bunnings, Officeworks and Catch experienced moderating sales growth from mid-March as they began to cycle the strong demand experienced in the prior year. Volatility in customer traffic to stores resulting from government mandated restrictions and physical distancing requirements also impacted sales growth.”
The weakening of sales and volatile business conditions could be a factor weighing on the Wesfarmers share price and earnings outlook.
In addition, Wesfarmers also flagged challenges along its supply chain, saying “Disruptions and capacity constraints in global supply chains led to some inventory delays and higher ocean freight charges. Some additional fulfillment costs were incurred in stores and distribution centres to accommodate peak periods of online demand.”
Weak year-to-date sales
Within Wesfarmers’ FY21 results, the company provided a trading update for its year-to-date performance across its retail businesses.
Wesfarmers’ commentary was far from inspiring, warning that “the impact of lockdowns on household and business confidence has become more acute as recent lockdowns have been extended and further widespread restrictions would negatively impact overall business activity and the Group’s trading performance.”
Bunnings’ sales for the first 7 weeks of FY22 declined 4.7% on the prior corresponding period (pcp) as solid growth from commercial customers was offset by a decline in consumer sales.
The combined Kmart and Target sales in the first 8 weeks declined 14.3% on pcp as a significant amount of stores were forced to close as a result of lockdown mandates.
Officeworks sales tipped 1.5% lower in the first 7 weeks driven by the impact of elevated sales in FY20.
Another factor driving down the Wesfarmers share price could be the company’s outlook commentary, citing that “the Group’s retail businesses during the first half of the 200 financial year may be below the prior corresponding period.”
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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.