Wesfarmers Earnings: Extraordinary Performance of Kmart Offsets Weaker Segments

Wide-moat Wesfarmers’ first-half fiscal 2024 earnings broadly track our full-year expectations. However, the performance of the conglomerate's individual businesses varied considerably against our forecast. The discount department store segment, Kmart Group, significantly beat our estimate. We were expecting earnings to decline due to rising wages and soft demand. On the contrary, Kmart posted solid sales and earnings growth, highlighting the appeal of Kmart’s customer proposition and tight cost control against a challenging macroeconomic backdrop. The stellar performance of Kmart offset muted sales growth at Bunnings and a collapse in commodity prices cutting WesCEF’s earnings nearly in half.