Key Highlights

• Its biggest division is Bunnings, the home improvement and building supplies chain, which reported FY26 Revenue of $20,399m.

• Kmart Group, covering Kmart and Target, followed with $11,751m.

• Wesfarmers Health, built around the Priceline network and Australian Pharmaceutical Industries, recorded $6,474m, while Officeworks reported $3,698m.

• From 1 July 2026 those two businesses moved into Bunnings, so the division will no longer be reported separately.

What does Wesfarmers (ASX:WES)' latest trading update tell investors about the resilience of Australian household spending? In short, it points to a Business still growing but facing a softer Bunnings, which is the group's largest Earnings contributor. On 28 October 2026, Wesfarmers said Bunnings sales growth had eased in recent weeks after a encouraging start to the first quarter of FY27, with lower sales in seasonal categories and the commercial segment weighing on performance. That matters because Bunnings generates well over half of group earnings before interest and tax, so shifts in its momentum carry weight for the whole conglomerate.

What Wesfarmers does and where the money comes from

Wesfarmers is a diversified Australian group. Its biggest division is Bunnings, the home improvement and building supplies chain, which reported FY26 revenue of $20,399m. Kmart Group, covering Kmart and Target, followed with $11,751m. Wesfarmers Health, built around the Priceline network and Australian Pharmaceutical Industries, recorded $6,474m, while Officeworks reported $3,698m.

The group also owns WesCEF, which spans chemicals, fertilisers and a lithium interest, and an Industrial and Safety division that housed Blackwoods and Workwear Group. From 1 July 2026 those two businesses moved into Bunnings, so the division will no longer be reported separately. OneDigital, the data and digital Investment arm, remains a loss-making area of deliberate investment.

The FY26 result in numbers

For the year ended 30 June 2026, group revenue rose 3.4% to $47,274m. Earnings before interest and tax were $4,493m, and net profit after tax was $2,874m, up 8.3% on FY25 profit excluding significant items. Statutory profit fell 1.8% because the prior year included gains of about $279m before tax, mainly from the Coregas sale. FY26 had no significant items.

Wesfarmers declared a final Dividend of 120 cents per share, fully franked, taking the full-year ordinary dividend to 222 cents, up 7.8%. Operating Cash Flow was $4,272m, down 6.5%, with cash realisation of 91%. Net financial Debt rose to $5,295m from $4,231m, alongside a $1.50 per Share Capital management distribution paid in December 2025.

Division by division

Bunnings lifted earnings before tax 5.1% to $2,455m, with total store sales up 4.0%. Kmart Group grew earnings before tax 6.0% to $1,109m, with comparable sales up 2.7%. Both businesses lean on everyday low prices, which management said continued to drive sales and earnings growth.

WesCEF was the standout, with earnings before tax up 18.5% to $473m. Lithium swung to a $40m earnings contribution from a $59m loss the year before, and spodumene production of 209kt exceeded guidance. Offsetting that, the Kwinana lithium refinery ramp-up was affected by odour issues, and Middle East Supply disruption affected fertiliser earnings in the second half.

Wesfarmers Health grew earnings before tax 18.8% to $76m, with Priceline network sales up 12.7%. Officeworks went the other way: earnings before tax fell 22.2% to $165m, mainly because of roughly $40m of one-off transformation costs. Management expects the transformation program to be complete by the end of calendar 2027.

What the October update added

The company's FY26 results said sales growth in Bunnings' first seven weeks of FY27 was slightly more encouraging than the second half of FY26, helped by dry July weather. The October update, shows that momentum has since cooled. Kmart and Officeworks were described as broadly in line with the second half of FY26, while WesCEF's encouraging operating performance was helping offset softer retail demand.

That backdrop sits behind the caution on discretionary and seasonal spending. The rate commentary comes from that report alone.

Sector conditions and competitive position

Australian retailers are contending with elevated borrowing costs, cost-of-living pressure and higher fuel prices. Wesfarmers argues that its value-focused brands may be better insulated than premium competitors and could benefit if shoppers trade down. That is management's view rather than an established outcome, and it will be tested over the Black Friday and Christmas trading period.

Bunnings competes with Mitre 10, Total Tools and a range of online and specialist suppliers, though its scale and a 69.2% return on capital give it considerable financial flexibility. Kmart competes with Big W, Amazon and fast-fashion retailers, while Priceline faces Chemist Warehouse and supermarket pharmacy offerings.

Investment commitments and costs

FY27 is a heavy investment year. Net Capital Expenditure guidance is $1,300m to $1,500m, including about $200m for the Mt Holland lithium expansion, where Wesfarmers' share of the project is estimated at $645m to $715m after a final investment decision on 22 July 2026. Kmart will run dual sites for its New South Wales Next Gen distribution Facility from October 2026, and the Built Living joint venture is due to begin investing, with up to $100m of Equity committed.

Management also expects higher labour, energy and supply chain costs to persist and borrowing costs to rise. Those pressures can erode the benefit of sales growth if productivity gains fall short.

Risks and what to watch

The main risks are a deeper slowdown in Bunnings seasonal and commercial sales, further Interest Rate rises, and execution challenges across Officeworks, Kmart's logistics changes and the Kwinana refinery. Lithium earnings also depend on Commodity prices and operating performance, and the Infinity Group Franchisee administration, covering 73 Priceline stores that continue to trade, is a smaller but live issue for Health.

Upcoming developments include the Black Friday and Christmas trading period, the first half FY27 result, expected in early 2027, which will include Blackwoods and Workwear Group within Bunnings for the first time, and progress on the Mt Holland expansion. Outlook comments are management expectations, not guarantees, and results could differ materially.