Stock of the day: Wesfarmers

(AI video summary)

This video was created on 22 May 2025 for IG audiences by ausbiz.

ASX code: WES

Wesfarmers' investor day highlights

Wesfarmers Chief Executive Officer (CEO) Rob Scott has called the recent interest rate cut 'welcome news' while acknowledging consumer struggles. At the company's investor day, he noted the cut would ease pressure on households and businesses, though benefits would take time to flow through.

The company expects lithium business losses around $60 million due to depressed pricing and market oversupply. Scott also indicated United States (US) tariff impacts on its battery value chain remain unclear.

Retail expansion and market performance

Despite resource segment challenges, Wesfarmers continues expanding retail operations, planning six new Officeworks stores in 2026 and rolling out more Anko-branded stores at Kmart, including expansion into the Philippines.

Following the investor day announcements, Wesfarmers's share price fell by nearly 1 percentage point, underperforming the broader market. Analysts note the stock trades at a price-to-earnings (P/E) ratio of 36, near its historic high.

Investment considerations and market sentiment

Market experts have mixed views on Wesfarmers. While acknowledging strong fundamentals including 30%+ return on equity, concerns exist about 'stability while generating flat earnings' over six years as inflation eroded 20% - 30% of earnings value.

Comparisons with Lowe's recent disappointing performance raise questions for home improvement retailers. Most analysts suggest holding Wesfarmers shares, noting it's high-quality but potentially overvalued, with better growth opportunities existing elsewhere.