Wesfarmers reported 1H25 EBIT growth of 5%. It was a solid sales and margin result in Kmart and WesCEF. Bunnings showed better sales trends, although underlying margins dropped slightly. The swing factor for Wesfarmers earnings growth over the next few years remains lithium and the path to profitability is most likely another 18 months away. Investors will need patience as well as optimism that lithium prices can rise from current depressed levels.

Wesfarmers reported modest EBIT growth of 3% in FY24 with low growth for Bunnings, a decline in WesCEF and strong rise in Kmart EBIT the notable factors. Bunnings earnings growth is likely to remain low over the next two years given limited store openings and a challenging demand backdrop. We think Kmart’s margins are near a peak, particularly given price competition with rivals is heating up. WesCEF and lithium become the key driver of Wesfarmers earnings from here and it will take up to three years to see meaningful earnings.

Wesfarmers reported a strong 1H23 result with EBIT up 13% to $2,160 million. The strength largely reflects good retail earnings and higher chemical and fertiliser prices. Even so, Bunnings profit margins declined and the good group result was partly overshadowed by a very large loss for Catch Group. The prospect for earlier lithium sales will help earnings in FY24e, although project capex is higher.