Wesfarmers (ASX:WES): Why Investors Are Watching This Stock

Sonal Goyal

24 September 2026 07:44 PM AEST

Wesfarmers (ASX:WES): Why Investors Are Watching This Stock

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Highlights

• Statutory NPAT of $2,874 million for FY26; underlying NPAT up 8.3% to $2,874 million excluding prior year significant items.

• Revenue grew 3.4% to $47,274 million, with Bunnings, Kmart Group, and WesCEF delivering strong Earnings growth.

• Total FY26 fully franked ordinary Dividend of $2.22 per share (up 7.8%), plus a $1.50 per Share Capital management distribution paid in December 2025.

• Covalent Lithium spodumene production of 209kt exceeded guidance and nameplate capacity, with refinery ramp-up affected by odour issues.

Wesfarmers Limited (ASX:WES) is one of Australia's largest companies and most diversified conglomerates, operating retail, industrial, and resources businesses across Australia and New Zealand. Key divisions include Bunnings Group (hardware and home improvement), Kmart Group (discount retail), Officeworks (office products and technology), Wesfarmers Health (pharmacy and healthcare), Industrial and Safety (Blackwoods and Workwear Group), and WesCEF (chemicals, energy, and fertilisers including the Covalent Lithium joint venture). Wesfarmers also maintains strategic investments including a 50% interest in Covalent Lithium with SQM.

Recent Development

Released on 27 August 2026, Wesfarmers reported statutory NPAT of $2,874 million for the full year ended 30 June 2026 — up 8.3% on FY25 excluding prior year significant items. Revenue grew 3.4% to $47,274 million. The result was supported by strong performances from Bunnings (everyday low prices driving sales and earnings growth), Kmart Group (strong Anko value credentials and operating efficiency), and WesCEF (positive operational performance and lithium contribution).

Wesfarmers Health delivered higher earnings as its multi-year transformation gained momentum. Officeworks' earnings reflected one-off transformation program costs, expected to drive long-term earnings growth. The Group paid a $1.50 per share capital management distribution in December 2025 and declared a fully franked final dividend of $1.20 per share, bringing total ordinary FY26 dividends to $2.22 per share (up 7.8%). Covalent Lithium produced 209kt of spodumene concentrate — above both guidance and nameplate capacity — though the Mt Holland refinery experienced intermittent odour issues affecting ramp-up. Industrial and Safety businesses transition to Bunnings Group effective 1 July 2026 was announced.

Sector Context

Wesfarmers' portfolio of everyday-essentials retail businesses (Bunnings, Kmart) provides significant resilience through economic cycles, as household budgets prioritise home improvement, affordable clothing, and everyday goods even when discretionary spending is under pressure. The Group's deliberate pricing strategy — dropping prices on thousands of products to support household budgets — reinforces both Volume and customer loyalty. WesCEF's Diversification into lithium through the Covalent joint venture represents a significant long-term strategic bet on the EV Supply chain, with 209kt of spodumene production now exceeding nameplate capacity at Mt Holland.

Risks and Uncertainties

The Mt Holland lithium refinery ramp-up has been affected by intermittent odour issues requiring mitigation, which has delayed product qualification with offtake partners. This is a near-term operational risk for WesCEF's lithium earnings contribution in FY27. Officeworks' transformation program costs ($1,300-$1,500 million planned group capex for FY27) and the ongoing cost of the broader digital and supply chain Investment program will weigh on near-term returns. Higher costs of doing Business — labour, energy, supply chain — are expected to persist in FY27. The Middle East conflict impact on WesCEF's fertiliser and chemical business (through energy and supply chain costs) remains an ongoing risk.

Catalysts to Watch

Ramp-up of the Covalent Lithium refinery — expected to accelerate in 2H FY27 as odour mitigation is implemented — is the most significant medium-term earnings catalyst, with product qualification with key offtake partners the next milestone. The Bunnings commercial capability expansion (via integration of Blackwoods and Workwear Group from 1 July 2026) could unlock new commercial customer revenue streams. Progress on the agentic commerce shopping assistants — Buddy (Bunnings), Joy (Kmart), and Ollie (Officeworks) — and the expanding marketplaces will indicate the pace of digital revenue growth. The early FY27 trading update (Bunnings slightly stronger, Kmart in line, Officeworks positive) was encouraging.

Final Thoughts

Wesfarmers (ASX:WES) delivered another solid underlying performance in FY26, with the resilience of Bunnings and Kmart providing the earnings foundation while WesCEF's lithium ambitions represent the highest-risk, highest-reward Long-term Growth option. The 7.8% dividend increase and $1.50 capital return reflect management's confidence in the earnings quality of the portfolio — but the refinery ramp-up and transformation cost investments will test investors' patience in the near term.

FAQs

Q: What is the Covalent Lithium project and why does it matter?

A: Covalent Lithium is a 50/50 joint venture between Wesfarmers and SQM (a Chilean lithium producer) operating the Mt Holland lithium mine and concentrator in Western Australia, along with the Kwinana lithium refinery. The project produces spodumene concentrate (lithium ore) at Mt Holland and is ramping up lithium hydroxide production at Kwinana. At 209kt of spodumene in FY26 (above nameplate capacity), the mining operation is performing well, but the refinery has experienced odour issues delaying product qualification with offtake partners.

Q: Why did Wesfarmers transfer Industrial and Safety to Bunnings?

A: The transfer of Blackwoods (industrial distribution) and Workwear Group to Bunnings Group (effective 1 July 2026) aligns businesses with highly complementary commercial customer bases. Bunnings has been building its commercial capabilities, and Blackwoods's broad product range, sophisticated fulfilment, and commercial service capabilities are expected to strengthen Bunnings's offer to trade and commercial customers, capturing a larger share of the commercial maintenance, repair, and operations (MRO) market.

Q: What is the Wesfarmers dividend and capital return outlook?

A: Wesfarmers declared a total FY26 ordinary dividend of $2.22 per share (fully franked), up 7.8%. In addition, a $1.50 per share capital management distribution (comprising $1.10 capital return and $0.40 special dividend) was paid in December 2025. FY27 capex guidance of $1,300-$1,500 million reflects continued investment in stores, supply chain, and the Covalent lithium expansion.

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