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Why has the Wesfarmers (WES) share price stumbled?


Shares in the owner of Bunnings and Officeworks have risen nearly 32% over the last 12 months.

Shares in conglomerate Wesfarmers (ASX: WES), the owner of retail chains Bunnings and Officeworks, are among the most traded stocks on the ASX on Friday. At the time of writing, the shares were down 2.5% at $62.39.

Why the WES stock price has slipped

The Perth-based diversified conglomerate on Friday detailed its full year results, and on the face of it, the numbers are exceedingly good.

Wesfarmers reported a 40.2% surge in net profit for the year to 30 June to $2.38 billion, while sales jumped 10% to $33.94 billion, largely on the back of its cash cow Bunnings and solid contributions from Officeworks as well as department store chains Kmart and Target.

Earnings rose nearly 20% at Bunnings, 7.6% at Officeworks and a whopping 69% at Kmart Group.

Although its final dividend was lowered by 5 cents to 90 cents per share, the company’s board has additionally recommended a capital return of $2 a share, which will add up to a $2.3 billion bonanza for shareholders.

However, investors chose to look past all the headline numbers and are instead focusing on the company’s “tough” start for the current financial year.

Lockdowns weighing

Wesfarmers said sales at each of its retail arms Bunnings, Kmart, Target, Catch and Officeworks, had fallen in the first weeks into fiscal 2022.

Sales were down 4.7% at Bunnings for the first 7 weeks of FY 2022, but the Kmart and Target chains seemed to have borne the brunt of the extended lockdowns in the major capital cities, recording a 14.3% slide in sales since July.

CEO Rob Scott said the lockdowns were hurting household and business confidence, and restrictions on stores in New South Wales are set to hurt business activity and the group’s trading performance. He said the next couple of months are going to be really tough for the company.

Wesfarmers, which also imports a significant volume of consumer goods, has flagged disruptions to global supply chains that are elevating freight costs and could cause stock shortages later this year.

The weak outlook could dent the strong performance of the Wesfarmers stock, which has risen nearly 32% over the past 12 months.

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