The Wesfarmers Ltd (ASX: WES) share price has been a very positive performer in 2020 and has smashed the market.
The conglomerate’s shares have rallied an impressive 24% higher since the turn of the year.
This compares to a small decline by the S&P/ASX 200 Index (ASX: XJO).
Why is the Wesfarmers share price zooming higher in 2020?
Investors have been buying Wesfarmers’ shares this year after it delivered a strong result in FY 2020 and continued this positive form in the new financial year.
For the 12 months ended 30 June 2020, the company reported a 10.5% increase in revenue from continuing operations to $30,846 million.
The key driver of this growth was its key Bunnings business. It was the star of the show in FY 2020 and recorded a 13.9% increase in sales to $14,996 million. Management advised that this was driven by solid demand for products during the pandemic after customers spent more time doing projects at home.
This was supported by its Kmart, Officeworks, and Catch businesses. Kmart recorded a 5.4% lift in sales to $6,068 million, Officeworks delivered a 20.4% lift in sales to $2,775 million, and Catch reported a big jump in sales to ~$600 million.
What about FY 2021?
The current financial year looks set to be equally successful for Wesfarmers.
A trading update in November reveals that it achieved strong sales growth across the business during the first four months of FY 2021.
Once again, the star of the show was the Bunnings business. It reported a 25.2% jump in sales during the period. As with FY 2020, this was driven partly by customers spending more time undertaking projects around the home.
Can the Wesfarmers share price go higher?
Although the Wesfarmers share price has been on fire this year, one leading broker still thinks it can go higher from here.
A recent note out of Credit Suisse reveals that its analysts have an outperform rating and $55.83 price target on its shares.
The broker has been looking at the household goods sector and believes the market is underestimating the boost to spending in this area due to more working from home. This led to Credit Suisse lifting its sales forecasts for the Bunnings and Officeworks businesses.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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