Wesfarmers reported a 12% fall in 1H22 EBIT. While the company flagged a drop in group earnings, the fall in Bunnings earnings and higher cost growth raises concerns. We expect earnings to fall in 2H22e as well. The bigger picture is Wesfarmers is lapping very strong earnings across its retail businesses from FY21. We are not concerned about price inflation creating a headwind because Wesfarmers operates in rational markets. However, higher operating costs are likely, including additional investment in digital capabilities as the company competes for a more viable position online.