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Wesfarmers (ASX: WES) shares experienced a challenging return to trading this Monday, reflecting a broader decline in the S&P/ASX 200 Index. The ASX 200 slipped by 0.46%, with Wesfarmers shares closing 0.075% lower at AU$66.65 apiece. Despite closing at AU$66.70 per share last week, Wesfarmers shares opened flat at $66 on Monday.
Investors may be puzzled by Wesfarmers' significant underperformance compared to the ASX 200. While there have been no official announcements from Wesfarmers to explain this downturn, a recent report regarding allegations against its subsidiary, Bunnings Warehouse, may be influencing investor sentiment.
According to ABC News, Bunnings is facing accusations from potted plant suppliers, alleging that the hardware chain is abusing its market power. Suppliers claim that Bunnings' aggressive dealings have caused significant stress and financial strain, with one supplier likening the experience to being treated as "serfs" and "slaves." Allegations of "legalized extortion" and threats in response to price increase requests have also surfaced during a recent Senate inquiry into supermarket pricing.
Boomaroo Nurseries, one of the affected suppliers, has decided to cease selling plants to Bunnings, citing an unsustainable business relationship. Similarly, Karen Brock, another nursery owner, expressed feeling like a "slave" to Bunnings and halted her supply operations to the company. Greenlife Industry Australia (GIA) has advocated for a mandatory code to protect suppliers from such practices.
However, not all nurseries have reported negative experiences with Bunnings. Brendan Haar from Haars Nursery highlighted positive interactions with Bunnings and expressed disagreement with GIA's accusations. Bunnings CEO Michael Schneider has vehemently defended the company's business practices, refuting the allegations and emphasizing the longstanding relationships with the majority of its greenlife suppliers.
Representatives from Bunnings are expected to address these allegations at the ongoing Senate inquiry. Investors will likely monitor developments closely, as the outcome of the inquiry and Bunnings' response could impact Wesfarmers' share price trajectory in the near term.
