Wesfarmers: old dependable delivers again, just don't expect any fireworks

In a market captivated by momentum and the latest shiny new thing, Wesfarmers (ASX: WES) continues to do what it has done for decades: execute consistently. And that's all they need to do, according to ClearBridge's Jim Power.

All they need is dependability and reliability. The rest is irrelevant. 

This result was another example. Sales and profit delivered, Bunnings rolled on, Kmart remained manageable, and lithium sits off to the side as a swing factor. 

The valuation may be demanding, but the formula remains unchanged: steady hands, disciplined capital allocation and consistency over time.

Key results (H1 FY26)

• NPAT: A$1.60bn vs A$1.54bn (+~4% vs consensus)

• Revenue: A$24.21bn vs A$24.25bn (-~0.2% vs consensus)
• EBIT: A$2.49bn vs A$2.41bn (+~3% vs consensus)
• Interim dividend: A$1.02 per share (fully franked) vs A$1.07 (-~5% vs consensus)
• Record date: 25 Feb | Payable: 31 Mar

FY26 Guidance (Capex)

• Capital expenditure: A$1.00–1.30bn vs A$1.10bn (midpoint in line with consensus)

Outlook commentary

• Retail divisions: Trading well in first six weeks of H2
• Bunnings & Officeworks: Sales growth broadly in line with H1
• Kmart Group: Sales growth stronger than H1
• WesCEF (Lithium): H2 earnings expected slightly ahead of H1 based on contracted spodumene volumes
• Industrials: Earnings remain sensitive to commodity prices, FX, competition and seasonality
• Wesfarmers Health: Positioned to improve earnings and returns, with growth in higher-margin Consumer and improving Wholesale performance

Do you currently hold WES and what is your rating?

We manage multiple funds; it's not held in the fund I help manage, but we do hold it in other funds. 

What matters from the results?

Wesfarmers is an easy one. I’ve been doing it for years. 

All they need is dependability and reliability. The rest is irrelevant.

From that point of view, it’s simple, and they’re always dependable, always reliable, and have been again in terms of sales and profit.

How do those outcomes affect the outlook?

Going forward, they need to remain dependable and reliable. They were yesterday, they will be tomorrow.

Around the edges, lithium is a bit of a swing factor, but it’s at the margin. Watching how lithium profitability unfolds as they finish commissioning on their downstream plants will be important for the headlines and sentiment.

What should investors be paying attention to as the story unfolds?

Bunnings is the one everyone associates with dependability and reliability.

Kmart is a big business. Wesfarmers is a massive business, however, and Kmart in itself won’t determine its destiny. They’ve had problems with supply chain and backend that they’re working through, but overall it won’t derail the whole company. They’ve got good people. Whatever problems there are, they work through as they always have.

Chemicals and fertilisers are volatile. People cut that one more slack because it’s a commodity business.

Lithium is the biggest swing factor at the moment and that story will play out. That’s more around the commissioning of the plant. Other hydroxide plants have had problems, so there’s probably some scepticism there. That will be the most volatile part of the chemical business that people will be intensely focused on as commissioning completes.

What could you be wrong about?

They need to be consistent to justify the high valuation. They get a high valuation because they’re dependable, consistent and they’re excellent.

Extremes take time to normalise unless something comes along to force change. What comes along to force change is difficult to see.

In terms of acquisitions, the risk of them doing something stupid is not zero, but it’s small. You can just look at the temptation to do a deal on 33x earnings that they’ve not bitten at over the last couple of years.