Strong result, falling share price – what the Wesfarmers' CFO says investors might be missing

Wesfarmers is one of the ASX’s most widely held and closely scrutinised companies.

With Bunnings contributing around 60% of earnings and retail divisions closer to 80%, it’s also one of the market’s clearest proxies for the Australian consumer.

So, when Wesfarmers delivered a result that beat expectations – driven in part by stronger lithium earnings – the market’s reaction was curious. The share price fell.

To understand what’s really going on beneath the surface, I sat down with Wesfarmers CFO Anthony Gianotti – the person responsible for the numbers, the capital allocation, and the long-term financial strategy of the business.

What followed was a clear message: the drivers of the business’s value may not be where the market is currently looking.

Key Data: 1H FY26 Result Snapshot

Company:

• Revenue: $24.21 billion (+3.2%)
• Underlying EBIT: $2.49 billion (+8.4%) (vs StreetAccount Consensus $2.41 billion)
• NPAT: +9.3% vs pcp
• Interim dividend: $1.02 (fully franked, +7.3%)

Divisional highlights:

• Bunnings EBIT: $1.47 billion (+10.7%)
• Kmart Group EBIT: $733 million (+13.8%)
• WesCEF EBIT: $210 million (+18%)
• Officeworks EBIT: $78 million (-10.3%)

“The share price follows”

The first question was the obvious one: strong result, weak share price.

Gianotti didn’t try to explain the market’s reaction, rather he noted that it’s a matter of controlling what one can control – driving growth through productivity and cost discipline.

“We delivered a really strong net profit after tax (NPAT), up 9.3%, which reflects execution across our divisions — particularly Bunnings and Kmart, which delivered record earnings again.”

It comes back to providing really strong value to consumers, particularly in a tougher economic environment. We reinvest productivity gains back into delivering lower prices, which helps grow the core businesses.”

What we’ve been focused on for a long time is making sure that we deliver earnings growth for our shareholders — and over time, the share price follows that earnings growth.”

It’s a simple but important distinction. Daily share price moves might reflect short-term expectations – but the focus internally remains firmly on long-term earnings growth.

“We’re just at the start of the lithium journey”

f there was one area of upside surprise in the result, it was WesCEF – particularly lithium.

We saw profits from our lithium business for the first time this half, which is great to see. But we’re really at the start of that journey – we’d expect stronger profits into the second half and over the coming years.”

hile broker commentary acknowledges that the ramp-up remains in its early stages – with progress still to be made as operations transition toward full downstream integration – that evolution is occurring against a shifting backdrop for the commodity itself. Lithium prices have recently emerged from a 3-year bear market, suggesting the cycle may now be turning more constructive.

Broadening the growth base

While lithium is drawing headlines, Gianotti was equally clear that the story at Wesfarmers is not about a single growth driver – it’s about the breadth of the portfolio.

“We want every part of the portfolio to perform. Our larger businesses will continue to grow, and that comes from investing in value, expanding our addressable markets, plus continuing to drive productivity.”

“Lithium is really just emerging into profitability, so over the next few years, we’d expect much stronger earnings growth there. Health is similar – we’re three and a half years into that turnaround, and we’re now seeing those investments start to bear fruit.”

“We’re making significant reinvestment in Officeworks at the moment. There are one-off costs this year as we reset the operating model, but that’s about positioning the business for stronger growth into FY27 and beyond.”

The result is a portfolio being actively repositioned – with multiple avenues for growth.

The elephant in the room: Bunnings reliance

or all the discussion around new growth avenues, the reality is that Wesfarmers remains heavily reliant on its core retail engine – and Bunnings in particular.

ith around 60% of earnings coming from Bunnings and close to 80% from retail more broadly, the group retains significant exposure to the Australian consumer, the housing cycle, and interest rate settings.

It’s a point Gianotti doesn’t shy away from – but nor does he see it as a vulnerability.

“Post-COVID, we’ve seen a period of elevated inflation and cost-of-living pressures, but Bunnings has continued to grow both sales and earnings through that period.”

For Gianotti, the resilience comes back to the same operating model that underpins the group more broadly: value, scale, and reinvestment.

“It’s about continuing to invest in lower prices for consumers, expanding our addressable market – whether that’s through new categories like pets or extending ranges – and driving productivity so we can reinvest back into price.”

That ability to lean into value during periods of pressure, he suggests, allows the business to perform even as conditions soften. At the same time, there is an embedded cyclical lever within the portfolio.

“We know housing activity has been subdued, and at some point that will turn. There’s an underlying undersupply of housing in Australia, and when that activity picks up, Bunnings will benefit.”

In that sense, the same concentration that creates risk on the downside may also provide leverage on the way back up – particularly if the housing cycle begins to recover.

Will Wesfarmers be an AI victor or victim?

With shares of several major ASX-listed technology companies being sold off harshly lately, this is perhaps a very pertinent question. According to Gianotti, artificial intelligence is a growing focus across the business.

“It’s a big theme for us. We’ve announced partnerships with Microsoft and Google to accelerate what we’re doing in AI.”

“We see AI as an enabler to drive productivity, improve customer experience, and improve team member experience. It can help deliver growth, but also improve costs – which we can reinvest back into price.”

“We take a people-first, digitally enabled approach. It’s about removing toil and helping our teams add more value.”

AI, in this context, is simply another extension of the productivity mantra, and by extension, the company’s pervasive focus on cost control.

Focus on “total” shareholder return

ianotti’s overarching message is simple: support businesses with productivity levers, convert those gains into lower costs, and ultimately create value for the consumer. At its core, however, the Wesfarmers strategy remains anchored in capital discipline.

“Our objective is to provide a satisfactory return to shareholders – we talk about that as being top quartile in total shareholder return.”

“If we have surplus capital, we’re very willing to return it – but we want to do that in a tax-efficient way.”

“We’ve reset the balance sheet and want to maintain flexibility to invest and take opportunities as they arise.”

“The key measures for me are return on capital and return on equity. If we improve those over time, that drives long-term share price performance.”

Wesfarmers is a stalwart of many Australians’ portfolios, valued for its strong fully franked dividends. However, Gianotti’s message is clear: dividends matter – but disciplined capital allocation matters more.

Conclusion

Wesfarmers delivered a strong first-half result, with the business continuing to execute across its core retail divisions, while lithium and health provide emerging growth pathways.

The share price reaction, however, suggests the market is still working through how that broader progress should be reflected. From my discussion with Gianotti, he is clearly confident the two will come back into alignment over time.

In a market environment as dynamic as the present, that alignment is far from guaranteed – but for now, the foundations of a high-quality, total shareholder return-driven business appear firmly in place.