The share price of Wesfarmers Ltd (ASX: WES) will be on watch this morning after it provided the market with a retail trading update for its performance in 2H20 so far.
The group revealed today that it has witnessed particularly strong demand from both its Bunnings and Officeworks stores.
The Wesfarmers share price has bounced back strongly since late March. The group’s share price has risen from $31.02 on 23 March to close at $41.71 last Friday. That’s an impressive increase of 34.5%.
Bunnings and Officeworks sales grow strongly
Compared to sales in the first half of the year (1H20), sales for Bunnings have risen very strongly so far in the current half (2H20). Bunning’s sales have risen 19.2% since the beginning of the year. This compares to only 5.8% during 1H20. For the FY2020 year-to-date, sales have also risen strongly for Bunnings. They were up by 11.3% compared to the prior corresponding period.
As a result of the coronavirus crisis, Australians have continued to spend more on goods to assist them in working and learning in a home environment.
The performance of Officeworks was also very strong. Sales were up by 27.8% for 2H20 to date, compared to only 11.5% in 1H20. FY2020 sales to date were also strongly up by 19.3% for Officeworks.
I believe that the strong performance of both Bunnings and Officeworks has made a significant contribution to Wesfarmers’ recent strong share price growth.
Pure online retailer Catch sees sales surge
The star performer for Wesfarmers in recent months has been its pure online offering in Catch.
Online sales for Catch have risen by a massive 68.7% in the half-year to date. This compares to only 21.4% in 1H20.
There has been a recent surge in online sales due to the coronavirus. All of Wesfarmers’ retail businesses witnessed massive combined total online sales growth of 89% for the half-year to date.
Wesfarmers’ online offerings have seen strong growth over the past few years.
It is quite likely that consumer habits are changing permanently. Many Australians may continue to choose the online channel over bricks and mortar stores in the years ahead due to its convenience and price competitiveness.
Where to now for the Wesfarmers share price?
As already mentioned, the group’s share price growth since late March has been very strong. However, I believe that Wesfarmers will be challenged to keep growing at this pace in the months ahead. Wesfarmers itself acknowledged today that it is uncertain if this sales growth can continue for the rest of the year. As government lockdown measures continue to ease, shopping patterns are likely to continue to get back to normal sooner rather than later.
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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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