---
endpoint: analytics
pattern: Consumer
status: done
latency_ms: 272943
conversation_id: 4f1f4c83-a0f0-4ce0-8528-2ab5a060fb47
citations: 19
created: 2026-05-31 21:07:47Z
---

# Provide a one‑year narrative of Wesfarmers, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# Wesfarmers (WES AU) — A One-Year Narrative: March 2024 → March 2025

*Note on vintage: this narrative draws on CLSA's internal coverage chain of dedicated WES notes. The freshest dedicated WES research in CLSA's archive is dated 27 March 2025, so the "trailing 12 months" framed below runs roughly **March 2024 → March 2025**. Stock-performance figures cited reflect the date-stamps of the originating notes.*

---

## 1. The Overarching Arc: From "Quality at a Full Price" to "Quality but Capped"

Across the last twelve months, the Wesfarmers narrative has been a tug-of-war between **outstanding execution in core retail** (Bunnings, Kmart, Officeworks) and a **valuation that ran consistently ~2 standard deviations above its historical relative PE band** [1]. CLSA's rating progression captured that tension: a 12-month string of *Underperform → Hold* calls, with the price target marching higher mechanically as the market multiple re-rated, but never enough to imply double-digit upside.

| Date | Note | Rating | PT (A$) | Stock vs ASX200 (12M) |
|---|---|---|---|---|
| 02-May-2024 | "Quality at a full price" (Strategy Day) | U-PF | 64.30 | — |
| 29-Aug-2024 | "Quality at a very full price" (FY24 result) | HLD | 68.10 | +22.4% rel [1] |
| 31-Oct-2024 | "Well positioned" (AGM) | HLD | 68.50 | +11.6% rel [5] |
| 21-Jan-2025 | "No more Catch" | HLD | 68.50 | +11.6% rel [9] |
| 20-Feb-2025 | "Getting to grips" (1H25 result) | HLD | 73.10 | +9.0% rel [10] |
| 27-Mar-2025 | "Building better" (Bunnings Day) | HLD | 70.10 | +4.4% rel [13] |

The key inflection: between August 2024 and February 2025 the absolute relative-PE multiple stretched even further; by March 2025, after a 3.6% absolute pull-back in the month and only +7.3% absolute over 12M, the stock had finally given some of the premium back — though it remained "trading and capable of trading beyond fundamental value" on three structural supports: favourable relative earnings growth, a retail mix "positioned for the times," and falling rates making banks less attractive [17].

---

## 2. August 2024 — FY24 Result: The "Kmart Quarter"

The FY24 result (year to 30 June 2024) was, in CLSA's words, **"pretty much bang in line with street expectations"** with EBIT +3% and NPAT +4%. Segmental colour was lopsided: **Kmart Group EBIT +23%** — the standout — while **Bunnings (the largest segment) grew only 3% ex-property**; Catch missed by 50% and WesCEF beat by 10% [1].

Kmart's structural step-change came from the **Anko direct-sourcing model**, which by H1 FY24 already represented ~85% of Kmart sales and was being rolled into Target. This was the result that lifted the market's anchoring on Wesfarmers' "quality" narrative.

But CLSA explicitly downgraded forward expectations off the result. Management's three-pronged FY25 message from CEO Rob Scott — that retail would grow, Health would grow strongly, and **WesCEF was harder to predict** — was accepted with caveats:
- Bunnings EBIT growth cut to 2% (from 4%) [2]
- WesCEF EBIT cut 13% to flat
- Group FY25 EPS growth: 5% (vs 11% previously) [2]

The valuation framing was the punchline: **"with the stock trading 2SD+ above historic relative PEs we consider the risk/reward to be skewed to the downside"** [3]. The PT lift to A$68.10 (from A$64.30) was *mechanical* — driven by a higher market multiple feeding the PE-rel sleeve of CLSA's valuation, not by any improvement in earnings power. Implied TSR at PT was –5% [4].

The investor takeaway: best-in-class retail at ~86% of group earnings, EPS growth comparing favourably to Coles/Woolworths/Endeavour/Metcash (weighted-average peer consensus +1.3%), but priced as if all of that — and more — were already in [3].

---

## 3. October 2024 — AGM: Macro Headwinds Re-asserted

The AGM trading update was deliberately qualitative, but the management tone shifted noticeably more cautious — **"inflation and interest rates continuing to pressure on household and business demand"** [5]. The Australian consumer cycle was the binding constraint.

CLSA's read of the print:

- **Bunnings, Kmart, Officeworks** (collectively ~85% of FY25 group earnings) — performing relatively well; all "positioned as price leaders"; sales benefiting from improved omnichannel [7]. Bunnings was already showing **trade-sales weakness tied to softer residential construction**, and Officeworks' business-customer demand was under pressure [7].
- **Health** — gaining momentum [5]
- **Catch** — gross transaction value further impacted by weaker discretionary demand and increasing competitive intensity; CLSA flagged that "investor patience could be running out" and the probability of exit was rising [6]
- **WesCEF** — depressed by low lithium prices [6]
- **Industrial & Safety (WIS)** — soft customer demand [6]

The result: a 3% downgrade to FY25CL EPS, 1% to FY26/27 [5]. PT inched up just A$0.40 to A$68.50, implying ~+2% TSR — a HOLD held in name only. The stock had pulled back 4% in the month into the AGM [13/from chunk on stock performance] and was still up 34.8% absolute YoY.

---

## 4. January 2025 — "No More Catch": A Catalyst the Market Had Priced

The 21-Jan-2025 announcement that **Catch would cease trading from 4Q FY25**, with fulfilment centres transferred to Kmart Group, was the single biggest portfolio action of the year. Combining the latest 1H25 guidance with one-off wind-down costs, CLSA modelled an aggregate **A$63m, or a 1.5% downgrade on current consensus for FY25 group EBIT** [9].

But strategically CLSA judged the move "prudent" — and crucially, **accretive to Kmart's logistics capabilities, sharpening its ecommerce edge** [9]. The market had been waiting for this exit since at least the AGM. PT and rating were unchanged at A$68.50 / HOLD.

This crystallised an underappreciated theme: Wesfarmers' management showing willingness to **prune sub-scale or sub-economic businesses** even at the cost of one-off charges. It set up the FY26/27 earnings reset that followed at 1H results.

---

## 5. February 2025 — 1H25 Result: Small Beat, Bigger Multiple

The H1 FY25 result was a **2% beat at both EBIT and EPS** — **EBIT +5%, EPS +3% on pcp** [10]. Composition:

- **Kmart Group** EBIT +7% — the star, again [10]
- **Bunnings** EBIT +3% [10]
- **Officeworks** + Health both disappointed relative to consensus [10]
- Management guided to "similar-to-improved" 2H25 trading momentum for the retail businesses [10]

CLSA tweaked the forward shape rather than the level:

| Year to 30 June | FY24A | FY25CL | FY26CL | FY27CL |
|---|---|---|---|---|
| Revenue (A$m) | 44,161 | 45,785 | 46,663 | 48,522 |
| Net profit (A$m) | 2,557 | 2,581 | 2,867 | 3,213 |
| EPS (A$) | 2.26 | 2.27 | 2.53 | 2.83 |
| EPS growth (% YoY) | 3.6 | 0.8 | 11.1 | 12.1 |
| P/E (x) | 34.4 | 34.1 | 30.7 | 27.4 |
| Dividend yield (%) | 2.6 | 2.6 | 2.9 | 3.3 |
| ROE (%) | 30.3 | 29.3 | 30.8 | 32.7 |

Source: CLSA, 20 Feb 2025 [18]

The forward reshape was driven by **three explicit moving parts** — divestment of Coregas, a more realistic phasing of lithium earnings, and the Catch exit — which together depressed FY26/27 EPS by 5%/4% but still left CLSA modelling **+11% EPS growth in FY26 and +12% in FY27** [11].

Critically, CLSA **abandoned the 50/50 DCF/PER methodology and shifted to a 100% PER-only PT** to mark the multiple to where the market was actually clearing trades [12]. PT lifted A$73.10 (from A$68.50) = 28.9x FY26CL EPS, "full but fair." Implied TSR at PT: -3%. HOLD retained [12].

The chart told the same story: by Feb 2025 the stock had gone from A$53 (Feb-23) to A$73 — a ~38% absolute move and **+50% relative to ASX200** over two years [19].

---

## 6. March 2025 — Bunnings Investor Briefing: Validating the Premium

The Bunnings investor day in Melbourne (27-Mar-2025) was framed as CLSA's clearest articulation of *why* the premium had been earned — and where the structural ceiling sits.

- **Addressable market re-defined and expanded**: Bunnings sized its market at **A$110bn** ("Home, Living, & Building Environments") — implying ~18% share against CLSA's FY25 revenue forecast of A$19.5bn. Back in FY13, on the narrower "Home Improvement & Outdoor Living" definition, share was also 18% — but the pie was just A$42bn. **Same 18% share, 2.6x larger pie** — that's the playbook [14].
- **Live example**: entry into the **A$1.5bn Automotive category** [14]
- **Space growth**: 2% p.a. retail space growth over the past five years; **guidance for 1–2% p.a. over the next five** (CLSAe 1.3% CAGR); sales density still well south of global peers [16]
- **Productivity**: improved rostering technology has **saved 3.4m hours since 2020** while lifting Net Promoter Score from 54 to 67. CLSA expects productivity to **flow into revenue growth and brand strength rather than EBIT-margin expansion** — an important nuance for forecasters [15]

The valuation finally came down: PT cut to **A$70.10 from A$73.10** as CLSA marked the multiple to a softer market (implied 27.4x FY26CL EPS) [13][17]. Implied TSR: 0%. HOLD retained.

---

## 7. Investor Sentiment & Valuation — How They Evolved

Three sentiment drivers ran through the full 12 months in parallel:

**(a) Earnings quality vs peer set.** Wesfarmers' forecast FY25 EPS growth (~1% per CLSA, rising to 11–12% in FY26/27) consistently beat the weighted-average peer-consensus of ~+1.3% for Woolworths, Coles, Endeavour and Metcash [3][10]. This relative-growth premium was the single most durable support to the rating.

**(b) Portfolio positioning vs macro.** With Australian inflation/rates still pressuring discretionary demand, the **value-orientated retail tilt** of Wesfarmers (Bunnings/Kmart/Officeworks at ~85–88% of FY25 earnings [7][10]) outperformed cyclically. Falling-rate expectations added a relative tailwind by making banks "less attractive" [10][17].

**(c) Multiple math.** The stock spent most of the year >2SD above its historical relative PE band [1][3], implying the absolute PE (~34x FY24) was higher than at almost any prior comparable period. CLSA's response — shifting valuation methodology mid-stream to a pure PER framework [12] — is itself a marker of how stretched the bridge between fundamentals and price had become. Net debt/equity stayed broadly stable at ~120% [18].

**Stock performance through the cycle** (per the dated CLSA notes):

| As of | 1M | 3M | 12M (Absolute) | 12M (Rel ASX200) |
|---|---|---|---|---|
| 29-Aug-2024 | +3.8% | +16.4% | +38.0% | +22.4% |
| 31-Oct-2024 | (4.0%) | (5.6%) | +34.8% | +11.6% |
| 20-Jan-2025 | +3.1% | +2.2% | +25.5% | +11.6% |
| 20-Feb-2025 | +7.7% | +7.6% | +19.7% | +9.0% |
| 27-Mar-2025 | (3.6%) | +0.7% | +7.3% | +4.4% |

The deceleration pattern is striking: the 12M relative-to-ASX200 return compressed from **+22.4% in August 2024 to +4.4% in March 2025**, even as absolute EPS performance held up. That is the signature of multiple compression off an extended starting point — exactly what the "trade beyond fundamental value" hold-rating thesis predicted.

---

## 8. What the One-Year Narrative Tells You

- **Operationally** — Wesfarmers delivered. Kmart's Anko model is the standout, putting up EBIT growth that masked patchier outcomes in Bunnings, Officeworks, Health and WIS.
- **Portfolio-wise** — management acted decisively on under-performers (Catch wound down, Coregas divested, lithium ramp re-phased) — all earnings-dilutive in the short term, but accretive to mix quality.
- **Macro-wise** — the consumer cycle did exactly what was feared (inflation/rates compressing discretionary), but Wesfarmers' value-tilt made that a relative tailwind for Kmart and Bunnings.
- **Valuation-wise** — the stock spent the entire year priced for perfection (>2SD above historic relative PE), and the **return profile gradually compressed** as the multiple had less and less room to keep stretching. By March 2025 the 12M relative return had fallen to single digits.
- **Rating-wise** — CLSA's call (HOLD throughout, PT range A$68.10 → A$73.10 → A$70.10) was a textbook example of "right on the company, wrong-side-of-priced on the stock" being held with discipline.

The forward setup CLSA leaves you with at March 2025: **FY26/FY27 EPS growth of 11–12%** [11], a Bunnings addressable-market expansion story that justifies the premium being defended, and a multiple that, post the March mark-to-market, is "full but fair" rather than visibly stretched [17]. The premium has been validated by execution; the upside from here depends on growth showing up exactly as modelled.

---

**Sources**
[1] Wesfarmers – HLD (Quality at a very full price), CLSA – Richard Barwick (29 Aug 2024) — 607937933LinqAlpha.PDF
[2] Wesfarmers – HLD (Quality at a very full price), CLSA (29 Aug 2024) — 607937933LinqAlpha.PDF
[3] Wesfarmers – HLD (Quality at a very full price), CLSA (29 Aug 2024) — 607937933LinqAlpha.PDF
[4] Wesfarmers – HLD (Quality at a very full price), CLSA (29 Aug 2024) — 607937933LinqAlpha.PDF
[5] Wesfarmers – HLD (Well positioned), CLSA (31 Oct 2024) — 607942769LinqAlpha.PDF
[6] Wesfarmers – HLD (Well positioned), CLSA (31 Oct 2024) — 607942769LinqAlpha.PDF
[7] Wesfarmers – HLD (Well positioned), CLSA (31 Oct 2024) — 607942769LinqAlpha.PDF
[8] Wesfarmers – HLD (Well positioned), CLSA (31 Oct 2024) — 607942769LinqAlpha.PDF
[9] Wesfarmers – HLD (No more Catch), CLSA (21 Jan 2025) — 607948619LinqAlpha.PDF
[10] Wesfarmers – HLD (Getting to grips), CLSA (20 Feb 2025) — 607951170LinqAlpha.PDF
[11] Wesfarmers – HLD (Getting to grips), CLSA (20 Feb 2025) — 607951170LinqAlpha.PDF
[12] Wesfarmers – HLD (Getting to grips), CLSA (20 Feb 2025) — 607951170LinqAlpha.PDF
[13] Wesfarmers – HLD (Building better), CLSA (27 Mar 2025) — 607954184LinqAlpha.PDF
[14] Wesfarmers – HLD (Building better), CLSA (27 Mar 2025) — 607954184LinqAlpha.PDF
[15] Wesfarmers – HLD (Building better), CLSA (27 Mar 2025) — 607954184LinqAlpha.PDF
[16] Wesfarmers – HLD (Building better), CLSA (27 Mar 2025) — 607954184LinqAlpha.PDF
[17] Wesfarmers – HLD (Building better), CLSA (27 Mar 2025) — 607954184LinqAlpha.PDF
[18] Wesfarmers – HLD (Getting to grips), CLSA (20 Feb 2025) — 607951170LinqAlpha.PDF (Financials table)
[19] Wesfarmers – HLD (Getting to grips), CLSA (20 Feb 2025) — 607951170LinqAlpha.PDF (Relative-to-ASX200 chart)

## Citations

- [1] **607937933LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/08/607937933LinqAlpha.PDF>
- [2] **607937933LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/08/607937933LinqAlpha.PDF>
- [3] **607937933LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/08/607937933LinqAlpha.PDF>
- [4] **607937933LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/08/607937933LinqAlpha.PDF>
- [5] **607942769LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/10/607942769LinqAlpha.PDF>
- [6] **607942769LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/10/607942769LinqAlpha.PDF>
- [7] **607942769LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/10/607942769LinqAlpha.PDF>
- [8] **607942769LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/10/607942769LinqAlpha.PDF>
- [9] **607948619LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607948619LinqAlpha.PDF>
- [10] **607951170LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951170LinqAlpha.PDF>
- [11] **607951170LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951170LinqAlpha.PDF>
- [12] **607951170LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951170LinqAlpha.PDF>
- [13] **607954184LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/03/607954184LinqAlpha.PDF>
- [14] **607954184LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/03/607954184LinqAlpha.PDF>
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- [16] **607954184LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/03/607954184LinqAlpha.PDF>
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- [18] **607951170LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951170LinqAlpha.PDF>
- [19] **607951170LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607951170LinqAlpha.PDF>

