What Happened to the Wesfarmers Share Price?
Wesfarmers Limited [ASX:WES] is a diversified conglomerate. The company operates chain supermarkets, liquor shops, home improvement and office retails stores, such as Bunnings and Officeworks, as well as mid-market department chain Target and the discount retailer Kmart.
Also under their umbrella are insurance and financial services, two coal mines, and a chemical and fertiliser division. They even have interests in industrial and safety products and services to the mining industry.
The share price closed 1.31% higher on Wednesday.
Why Did This Happen to WES Shares?
First quarter retail sales for 2015 came out this morning.
Aside from discount retail chain Target, it’s mostly good news for the company.
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Food and alcohol sales grew by 5.8%. Coles supermarket sales were 4% higher. The home improvement centres and supplies sales is 10.5% up and Kmart sales increased by 2.9%.
Target sales are down a 4.6%.
In addition to the negative Target results, Curragh Coking Coal sales price was lower by 25% compared to the same time last year.
What Now For Wesfarmers Limited?
Wesfarmers have several profitable retail businesses under their watch. The big question for many investors at the moment is: Can Target become a profitable business too?
Wesfarmer’s quarterly statement said Target’s result reflect the ‘transformation’ the chain store is undergoing.
Currently, management are transitioning the business from a high-low price model (that is, use discounts to drive sales) to a ‘first price, right price’ model. Which is a similar style to the low cost retailer Kmart.
Target has reported net losses for the past couple of years. In addition, there has been two management changes since 2011. Both reshuffles have been unable to effectively work out where Target should sit as a chain retailer. Ideally, this latest approach will see the chain store return to profit.
Wesfarmers have made no mention of selling the battered chain store. However, this financial year will tell if the latest brand shift has paid off.
Wesfarmers is a solid defensive stock. It’s currently trading around $43. However, can be volatile stock and quickly drop over a few days, which may provide a good entry point. The stock has fallen as low as $40 this month.
Shae Smith+
Editor, Money Weekend
The post Why the Wesfarmers Share Price Rose Today appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
