Is ASX 200 listed Wesfarmers the best Supermarket Share?

Summary

• ASX 200 listed Wesfarmers, a leading Australian retailer, has garnered attention for sweeping the market and generating YTD return of 17.59 per cent.
• Wesfarmers swelled online sales by 60 per cent (excluding Catch) during 2020 to AU$1.5 billion, or AU$2.1 billion (including Catch), demonstrating persistent shifts in customer shopping preferences and enriched digital offers.
• Wesfarmers through its recently released FY20 results ended 30 June and diversified earnings from across its Bunnings, Kmart, Officeworks and Catch business units echoed that its robust balance sheet, with deep cash reserves empowers the Group to withstand numerous economic scenarios, while continuing to underpin its operating activities and pursuit of investment opportunities.
• Furthermore, the Group’s relentless focus on customers; addition of competencies, channels, and new technology; and building on unique capabilities, as well as platforms are likely to create long-term value for the business.

Owing to the COVID-19 induced physical distancing and lockdowns, numerous brick and mortar stores closed their doors, encouraging customers to shift to digital stores. Numerous online platforms of various businesses witnessed a new wave of shoppers, compelling almost all retailers to focus on the development of their digitally enabled stores to withstand the crisis period and outpace their competitors.

Did you read; Melbourne Lockdown and Impact on Businesses: Baby Bunting, JB Hi-Fi, Wesfarmers

Notably, numerous ASX-listed digitally-enabled retailers and omni-channel retail players benefitted during the pandemic and continued to write success stories.

These success stories uplift the sentiments of numerous market participants and boost their confidence as well.

Notably, on 21 August 2020, the benchmark S&P/ASX 200 index ended the day’s session at 6,111.2, indicating a marginal decline of 0.14 per cent as compared to previous day’s close. On 24 August, the same index was trading at 6107.4, decreasing by 0.06% (at AEST 2:12 PM).

Did you read; Digital technologies revamping businesses

On that note, let us cast an eye over ASX200 listed company, Wesfarmers Limited (ASX:WES)

Australia’s leading retailer, Wesfarmers with its diversified business portfolio of apparel and general merchandise; home improvement and outdoor living; industrial business (to name a few) has generated an impressive YTD return of 17.59 per cent.

On 21 August 2020, Wesfarmers share price was at AU$48.730, indicating a marginal decline of 0.103 per cent compared to its last close. However, on 24 August Wesfarmers was trading at AU$ 49.42, climbing up by 1.416% (at AEST 2:13 PM).

Did you read; Supermarkets in Fast-Growing Digital Business and B2B Model

Let us now quickly apprise ourselves with this ASX listed company and its latest news.

Business performance during FY20

On 20 August 2020, ASX listed Wesfarmers unveiled its FY20 performance report for the period ended 30 June and highlighted surged revenue from continuing operations standing at AU$30,846 million.

The substantial y-o-y increase of 10.5 per cent was driven by enlarged sales across its Bunnings, Kmart, Officeworks and Catch business divisions.

Even though the turbulent waves of COVID-19 pandemic impacted the retail industry, it also drove customers to shop for products online.

Did you read; June Retail Sales – 3 Key Trends

Noteworthy, robust growth in Wesfarmers online sales of 60 per cent (excluding Catch) during the year to AU$1.5 billion, or AU$2.1 billion (including Catch), demonstrated persistent move in consumer shopping preferences and enriched digital offers.

Did you read; Wesfarmers Provided Update on the Impact of COVID-19, Bunnings and Officeworks Reported Sales Growth

Additionally, Wesfarmers Bunnings and Officeworks noted a considerable increment (y-o-y) of 13.9 per cent, and 20.4 per cent, respectively. The swelled revenues are ascribed to the soared demand for products as customers spent longer time learning, working, and doing projects at their households amid COVID-19.

Source: Company’s presentation, dated 20 August 2020

Did you read; Significant Shift Towards e-retailing, Is Brick-and-Mortar Model at Perpetual Risk?

Although Wesfarmers net profit after tax (NPAT) from continuing operations (excluding significant items) noted an increment of 8.2 per cent. Statutory NPAT (from discontinued operations and significant items) stood at AU$1,697 million for the FY2020, on a post AASB16 basis.

Furthermore, Wesfarmers also divulged its bolstered financial position with AU$0.5 billion net cash, as on 30 June 2020 versus AU$2.1 billion net financial debt noted in FY19, indicating Wesfarmers’s boosted operating cash flow performance and sale of the 10.1 per cent stake in Coles producing gross proceeds worth AU$2.1 billion, offset by the acquisitions of Kidman and Catch totalling ~$1.0 billion.

Did you watch; Coles reports retail profit uplift | ASX Market Update

It is worth noting that Wesfarmers’s free cash flows for FY20 stood at AU$4,239 million (on pre-AASB 16 basis), indicating a y-o-y swelled growth of 43.1 per cent.

Wesfarmers also highlighted operating cash flow of AU$3,597 million (on pre-AASB 16 basis) for the period versus AU$2,718 noted in y-o-y.

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Dividend

Wesfarmers announced a total dividend of 170 cents per share (cps) in FY20, inclusive of 1H20 interim dividend of 75 cps, a final dividend of 77 cps and a special dividend (reflecting distribution of profits on sale of 10.1 per cent stake in Coles during FY20) of 18 cps.

Notably, the fully franked final dividend of 95 cps (including final and special dividend) would be paid on 1 October 2020. The dividend would go ex on 25 August 2020, and has a record date of 26, 2020.

Additionally, Wesfarmers also furnishes its eligible shareholders with an option to invest dividends in ordinary shares, which rank equally with Wesfarmers ordinary shares. The last date for receipt of applications to terminate or to participate in or change contribution in the plan is 27 August 2020 by 5:00 PM (AWST).

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Source: Company’s presentation, dated 20 August 2020

Notably, Wesfarmers’s strengthened balance sheet, with deep cash reserves authorises the Group to withstand numerous economic scenarios and thrive while continuing to assist its operating activities, in pursuit of investment opportunities.

Furthermore, the Group’s relentless focus on customers; innovation across products and processes; addition of proficiencies, channels and new technology; and building on unique capabilities, as well as platforms with the burgeoning trend of the online marketplace is noted to create long-term value and success of the business.