---
endpoint: analytics
pattern: Consumer
status: done
latency_ms: 268777
conversation_id: 568a3a71-b943-461d-9e97-8084c985cd36
citations: 16
created: 2026-05-31 21:04:51Z
---

# What catalysts could drive upside/downside for Wesfarmers in the next 12–18 months?

# Wesfarmers (WES.AU) — Catalyst Map for the Next 12–18 Months

**Setup.** WES sits at A$71.50 (52-week low, -6.9% over twelve months) [7], with the sell-side mix moving toward "neutral-to-cautious" — Goldman initiated Neutral at PT A$75 in Mar-26, Citi cut to Sell with PT chopped to A$69 from A$90 in Apr-26 [5], and Jarden upgraded only to Neutral at A$74.50 from underweight [6]. CLSA's lead analyst Richard Barwick is on HOLD with PT A$80.60 post H1-FY26 [3]. The catalyst path from here is binary: a re-rating depends on whether the next 2–3 prints show retail momentum re-accelerating with WesCEF lithium delivering, OR whether sluggish discretionary spend and lithium execution slips drag earnings revisions lower.

CLSA's published catalyst list (carried unchanged from Oct-24 through Mar-25) is the cleanest framework: **macro/inflation in Australia, Catch turnaround, on-time Covalent Lithium development, and ammonia price** [10][11]. Below I expand each axis with the latest data and add three further levers (Health, OneDigital monetisation, and M&A optionality) that have emerged since.

---

## 1. Earnings concentration sets the asymmetry

Retail (Bunnings + Kmart + Officeworks) contributes ~88% of group earnings in FY25CL per CLSA, with Bunnings + Kmart alone driving most of it [14]. CLSA's investment-risk text reiterates: "Wesfarmers' retail businesses typically contribute more than 80% of group earnings, with Bunnings and Kmart the most important. General macro environment would create both upside and downside risks to the retail business" [12][13]. **Translation: any RBA easing or fiscal-stimulus surprise feeds straight to the dominant earnings engines; conversely, sticky inflation/sluggish consumer is the single largest downside vector.**

Management's own framing (at its strategy briefing) is consistent — "most of these growth opportunities exist within our larger businesses, Bunnings, Kmart and WesCEF" [1].

---

## 2. Upside catalysts (12–18 months)

### (a) **WesCEF / Covalent Lithium ramp** — the swing factor
- The H1-FY26 beat (NPAT A$1.60B vs A$1.54B Street) was driven by **WesCEF EBIT +18% y/y to A$210M vs Street A$153M** — lithium reaching profitability earlier than expected was "the standout swing factor" per consensus [9][3].
- Guidance: H2-FY26 lithium earnings expected **"slightly ahead of H1"**, with customer contracts already covering the majority of WesCEF's spodumene concentrate share [4].
- Management has flagged Covalent Lithium as a **net new earnings stream** ramping toward lithium hydroxide production [2].
- CLSA's segment model has WesCEF EBIT recovering from A$424M in FY25CL to A$479M in FY26CL (+8.9% revision higher) and A$634M in FY27CL [16].
- **Key inflection over the next 12–18m**: on-time/on-budget commissioning of the Covalent hydroxide refinery and confirmation of higher-grade spodumene volumes. CLSA flags "on-time, and on-budget, development of the Covalent lithium project" as an explicit catalyst [10][11].
- Secondary lever: **ammonia price** at the WA fertiliser plants — also called out as a catalyst by CLSA [10][11].

### (b) **Bunnings momentum re-acceleration**
- Bunnings H1-FY26 EBIT A$1.47B, +10.7% y/y, beat Street A$1.46B [9].
- 2H-FY26 sales growth running broadly in line with H1 in the first six weeks per management guidance [4].
- Bunnings' Mar-25 investor briefing emphasised a A$110bn addressable market with ongoing range expansion and tech-driven productivity gains. This underpinned CLSA's argument that "Wesfarmers should trade at a premium" [10].
- **Catalysts**: re-acceleration of trade/commercial demand if housing construction recovers; productivity upside from automated frame-and-truss plant and new CFCs. Conversely, any sequential deceleration in like-for-like sales would be a high-multiple compression risk.

### (c) **Kmart EBIT margin expansion**
- Kmart H1-FY26 EBIT A$733M (+13.8% y/y) — outpacing top-line (+3.2% y/y) [9].
- Management has called the Anko own-brand model the proof point of "a step change in performance and… new growth opportunities for the future".
- Catch wind-down funnels its logistics into Kmart Group, "bolster[ing] its logistics capabilities, further enhancing Kmart's competitive edge in the growing ecommerce market" [10].
- **Watch**: Kmart Group sales growth was already running stronger than H1 in the first six weeks of H2-FY26 [4].

### (d) **Wesfarmers Health turnaround**
- H1-FY26 API/Health EBIT A$43M, +4.9% y/y [9]; management calls this "well positioned to continue to improve earnings and returns" by shifting toward higher-margin, less capital-intensive Consumer business [4].
- CLSA's segment model has Health EBIT recovering from A$65M in FY25CL to A$145M in FY26CL (a 2.2× jump) and A$165M in FY27CL [16] — that delta alone is ~A$80M of incremental EBIT, ~2% of group.
- **Optional M&A leg**: WES has been linked to the launched sale process for **Infinity Pharmacy Group** alongside Sigma (SIG.AU) [8] — a bolt-on that would deepen pharmacy distribution.

### (e) **OneDigital / retail-media monetisation**
- Management has flagged OneDigital + OnePass loyalty as an emerging "incremental earnings" stream including a build-out of a group retail-media network across Bunnings, Kmart, Officeworks, Priceline screens.
- Group hit A$33bn retail sales with 40% growth in online sales since FY20 and 210M monthly digital interactions; OneDigital losses run-rating ~A$70M in FY24, expected to compress as subscription income offsets investment.
- This is **optionality, not a 12-month earnings driver** — the swing comes if WES starts disclosing retail-media GTV/take-rate metrics, which would let the market underwrite Amazon-style ad revenue.

### (f) **M&A / portfolio renewal**
- Management explicitly cites "renewing the portfolio through value-added transactions" as one of four strategic pillars and points to the Catch shutdown, Target conversion, and Coregas divestment as proof [1].
- WES retains a strong balance sheet — H1-FY26 FCF A$2.75B (+35.6% y/y), net capex A$311M [9] — and is already linked to Infinity Pharmacy [8].
- **A bolt-on in Health, or a Covalent ownership step-up, could be re-rating catalysts**.

---

## 3. Downside catalysts

### (a) **Macro / consumer-discretionary slowdown**
- CLSA's risk text: "General macro environment would create both upside and downside risks to the retail business" [12][13].
- Mgmt's own Oct-24 AGM tone was "understandably cautious with 'inflation and interest rates continuing to pressure on household and business demand'" — and weakness was visible in Catch, Industrial & Safety, and WesCEF (low lithium prices at that vintage) [13]. The risk symmetry hasn't structurally changed.
- May-26 tape: WES traded to a fresh 52-week low (A$71.50, -6.9% y/y) [7], with the broader Australian Retail Trade sector showing 8–9 new 52-week lows on the day [7] — a sentiment headwind.

### (b) **Valuation compression on a multiple still > 2SD above history**
- At the H1-FY25 print, CLSA noted WES was trading **>2SD above historic relative PEs** [14], and post-H1-FY26, NTM P/E was 31.3x vs the 5-year average of 27.0x (range 17–43x); EV/EBITDA 15.6x vs 5y average 13.0x [3].
- Sell-side ratings post H1-FY26: 13% Buy / 40% Hold / 47% Sell with average target A$81.77 [3] — heavily skewed Sell.
- Citi specifically pulled its target from A$90 to A$69 (down 23%) and moved to Sell [5]. **A multi-broker target-price reset is a live risk if 1H consumer signals soften further.**

### (c) **Lithium execution slippage**
- JPMorgan flagged at H1-FY26: "Lithium ramp delay limits near-term upside" [3].
- WesCEF earnings carried the H1-FY26 beat narrative; if refinery ramp-up issues persist (already flagged by some brokers despite spodumene strength), the WesCEF FY26 EBIT step-up CLSA models (+13% to A$479M) [16] becomes the next downgrade vector.
- Spodumene price reversal or ammonia weakness would compound this — both are explicit CLSA catalysts in either direction [10][11].

### (d) **Catch wind-down + Health margin pressure**
- Catch ceased trading from 4Q-FY25 with **A$50-60M one-off costs and a ~A$63M (~1.5%) FY25 group EBIT downgrade** to consensus [10].
- CLSA's Feb-25 model already cut Catch FY25 EBIT to -A$114M (loss deepened by ~50%) [15].
- Health margins were "weaker than expected" at the H1-FY25 print [15] and remain a base-case watch — Health 1H26 EBIT was only A$43M [9] vs CLSA's FY26 model of A$145M, implying a meaningful 2H step-up that needs to be delivered.

### (e) **Industrial & Safety / WIS structural drag**
- I&S H1-FY26 revenue -12.2% y/y; EBIT A$34M, -34.6% y/y [9]. CLSA models I&S revenue dropping from A$2.02B in FY25 to A$1.54B in FY26 (-24%) reflecting Coregas divestment [16] — a known transition, but execution slippage on margin recovery in the residual business would weigh.

### (f) **Officeworks transformation execution risk**
- UBS at H1-FY26: "Officeworks transformation aimed right, execution risk rose" [3]. CLSA modelled Officeworks EBIT broadly flat at ~A$249M in FY26CL [16]. Disappointment here is a low-probability but visible negative catalyst.

---

## 4. 12–18 month catalyst calendar (the data points that move the stock)

| Window | Event | Why it matters |
|---|---|---|
| **Aug 2026** | FY26 Full-Year result (year-end 30 June) | First clean read on full-year lithium contribution; FY27 guidance tone |
| **Oct/Nov 2026** | AGM trading update | Set tone for FY27 — historically a quarter for forecast revisions [13] |
| **Continuous** | Covalent Lithium hydroxide refinery commissioning | Determines whether WesCEF FY27 EBIT step-up to A$634M (CLSA) [16] is credible |
| **Continuous** | Spodumene & ammonia spot prices | CLSA-flagged catalyst on either side [10][11] |
| **Feb 2027** | H1-FY27 result | Last major print in this 18m window; tests whether retail re-accelerated as rates fell |
| **Discretionary** | Infinity Pharmacy auction outcome [8] | Health bolt-on optionality |
| **Discretionary** | RBA rate decisions | Direct read-through to Bunnings/Kmart sales momentum |
| **Discretionary** | OneDigital retail-media disclosure | Could unlock a hidden-asset re-rating |

---

## 5. Net stance

The catalyst skew is **balanced-to-slightly-negative** over the next 12–18 months:

- **Upside path** (PT >A$85): lithium beats persist + Bunnings/Kmart re-accelerate as rates fall + Health doubles EBIT as forecast → CLSA-base FY27 EBIT A$4.93B [16] gets hit, multiple holds.
- **Downside path** (PT toward Citi's A$69 [5]): lithium ramp slips + retail momentum cools further + multiple compresses from current 31x NTM P/E (vs 27x 5y average) toward mid-cycle. Sell-side already at 47% Sell weighting [3] — there's room for further capitulation.

The **single-most-important variable** is WesCEF lithium execution. It carried the last beat [3], and at WES's stretched multiple, retail no longer has spare capacity to absorb a WesCEF miss — Bunnings/Kmart deliver in line; lithium is what surprises in either direction.

---

**Sources**

[1] Wesfarmers Strategy Briefing — Special Call (Robert Scott on growth opportunities in Bunnings, Kmart, WesCEF)
[2] Wesfarmers Strategy Briefing — Special Call (Robert Scott on Covalent Lithium, Health, OneDigital as new earnings platforms)
[3] Street Takeaways — Wesfarmers H1 Earnings — StreetAccount (19 Feb 2026) (CLSA Barwick PT A$80.60; sell-side ratings 13/40/47%; NTM P/E 31.3x)
[4] Wesfarmers reports H1 NPAT A$1.60B vs StreetAccount A$1.54B — StreetAccount (18 Feb 2026) (FY26 guidance: capex A$1.0-1.3B; H2 lithium slightly ahead of H1)
[5] Citi downgrades HVN.AU, MTS.AU, WES.AU — StreetAccount (17 Apr 2026) (Sell; PT cut to A$69 from A$90)
[6] Jarden upgrades JBH.AU, WES.AU — StreetAccount (26 Apr 2026) (Neutral; PT A$74.50)
[7] StreetAccount 52-week highs/lows summary (13 May 2026) (WES.AU A$71.50, -6.9% 52w)
[8] StreetAccount M&A Summary — Week of 9-Feb (17 Feb 2026) (Infinity Pharmacy Group sale process)
[9] StreetAccount Metrics Recap — Wesfarmers H1 Earnings (18 Feb 2026) (Bunnings EBIT +10.7%; Kmart +13.8%; WesCEF +18%; I&S -34.6%; FCF A$2.75B)
[10] Wesfarmers — HLD (Building better) — CLSA (27 Mar 2025) — 607954184LinqAlpha.PDF (Catalysts: macro/inflation, Catch turnaround, on-time Covalent lithium, ammonia price)
[11] Wesfarmers — HLD (Well positioned) — CLSA (31 Oct 2024) — 607942769LinqAlpha.PDF (Catalysts identical to Mar-25 list)
[12] Wesfarmers — HLD (No more Catch) — CLSA (21 Jan 2025) — 607948619LinqAlpha.PDF (Retail = 80%+ of earnings; Bunnings/Kmart most important; macro creates upside/downside)
[13] Wesfarmers — HLD (Well positioned) — CLSA (31 Oct 2024) — 607942769LinqAlpha.PDF (AGM cautious tone; 3% FY25 EPS downgrade; PT A$68.50)
[14] Wesfarmers — HLD (Getting to grips) — CLSA (20 Feb 2025) — 607951170LinqAlpha.PDF (Bunnings/Kmart/Officeworks = 88% of FY25 earnings; stock >2SD above historic relative PEs)
[15] Wesfarmers — HLD (Getting to grips) — CLSA (20 Feb 2025) — 607951170LinqAlpha.PDF (Catch exit costs + Health margin weakness drive FY25 EPS downgrade)
[16] Wesfarmers — HLD (Building better) — CLSA (27 Mar 2025) — 607954184LinqAlpha.PDF (Segment forecast table: WesCEF FY26 EBIT A$479M +8.9% revision; Health FY26 A$145M)

## Citations

- [1] **Wesfarmers Limited - Special Call** · external
- [2] **Wesfarmers Limited - Special Call** · external
- [3] **Street Takeaways - Wesfarmers H1 Earnings** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4566690&_doc_date=2026-02-19&_doc_product=SA>
- [4] **Wesfarmers reports H1 NPAT A$1.60B vs StreetAccount A$1.54B** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4564083&_doc_date=2026-02-18&_doc_product=SA>
- [5] **Citi downgrades HVN.AU, MTS.AU, WES.AU** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4630345&_doc_date=2026-04-17&_doc_product=SA>
- [6] **Jarden upgrades JBH.AU, WES.AU** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4640898&_doc_date=2026-04-26&_doc_product=SA>
- [7] **StreetAccount Summary: Australia and New Zealand Stocks reaching new 52-week highs/lows** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4676782&_doc_date=2026-05-13&_doc_product=SA>
- [8] **StreetAccount M&A Summary: Week of 9-Feb** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4558849&_doc_date=2026-02-17&_doc_product=SA>
- [9] **StreetAccount Metrics Recap - Wesfarmers H1 Earnings** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4564152&_doc_date=2026-02-18&_doc_product=SA>
- [10] **607954184LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/03/607954184LinqAlpha.PDF>
- [11] **607942769LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/10/607942769LinqAlpha.PDF>
- [12] **607948619LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607948619LinqAlpha.PDF>
- [13] **607942769LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/10/607942769LinqAlpha.PDF>
- [14] **607951170LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951170LinqAlpha.PDF>
- [15] **607951170LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951170LinqAlpha.PDF>
- [16] **607954184LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/03/607954184LinqAlpha.PDF>

