Why I think the Wesfarmers share price is a buy after its HY26 result

Any Australian investor who has held Wesfarmers Ltd (ASX: WES) shares for the long term is sitting on a pleasing gain. I still believe that buying today could lead to solid long-term performance.

The ASX retail share giant took a bit of a hit yesterday, declining by more than 5% after reporting on the first six months of FY26.

Every shareholder who sold yesterday may have had different reasons for exiting, but I saw several positives that make me optimistic about the company that owns Kmart, Bunnings, Officeworks, Priceline, WesCEF, and a number of other businesses.

Solid earnings

It’s clear from the headline numbers that Wesfarmers has continued to grow despite economic challenges faced by some customers.

Wesfarmers reported that revenue grew by 3.1% to $24.2 billion, operating profit (EBIT) rose 8.4% to $2.5 billion, net profit rose 9.3% to $1.6 billion, and earnings per share (EPS) climbed 9.3%.

Those figures won’t be the largest growth numbers we see during this reporting season. But we should keep in mind that Wesfarmers has delivered steady growth since the start of the 2020s. These profit numbers are compounding year after year.

The fact that it’s still able to deliver close to double-digit profit growth as a business that makes most of its revenue from selling physical products is impressive to me, considering the challenging retail environment and how large the business already is.

Great performance at core businesses

Wesfarmers generates a large majority of its revenue and earnings from two businesses: Bunnings Group and Kmart Group.

In the HY26 result, Bunnings Group revenue rose 4% to $10.7 billion, and Kmart Group revenue climbed 3.2% to $6.4 billion. In terms of earnings, Bunnings Group delivered 5% growth to $1.39 billion, and Kmart Group achieved 6.1% growth to $683 million.

Revenue growth at these businesses is so powerful for Wesfarmers because of the high returns they generate.

In HY26, Bunnings Group delivered a return on capital (ROC) of 70.8%, while Kmart Group delivered a ROC of 69.8%. The fact that these are so high suggests to me that Wesfarmers can continue unlocking strong, profitable growth for shareholders.

The high ROC feeds into a very compelling return on equity (ROE) for the overall Wesfarmers business. The ROE (excluding significant items) increased by 1.5 percentage points to 32.7%, which is a strong sign on multiple fronts, including that Wesfarmers is becoming more profitable with the shareholder money retained in the business rather than paid out as a dividend.

Kmart and Bunnings seem poised to continue growing for years to come.

Strong growth potential

Wesfarmers is already a huge business, so I’m not expecting it to grow revenue or profits rapidly.

But it has put in place several compelling earnings-boosting plans.

For example, it has been expanding its Anko store network in the Philippines. Three new Anko stores were opened during the first half of FY26. I’m hopeful that Anko stores will expand to other Asian and non-Asian markets in the coming years.

Kmart has also launched a third-party marketplace, which has seen “positive early trading results”, and this also expands the company’s total addressable market.

Bunnings continues to expand its product range, with a recent focus on vehicle products and pet care. Online sales and trade customers are also two growth areas the company can continue to target.

With its healthcare and lithium earnings growing in HY26, there is also a positive outlook for these segments. Lithium prices have jumped in recent months (boding well for future profitability), while healthcare remains a very large market with significant tailwinds. I expect Wesfarmers will attempt to expand its healthcare division further in the coming years.

Overall, there is a lot of evidence that the company can continue compounding its earnings over the long term, which doesn’t factor in the positive trading update for the second half of FY26, which included accelerating sales growth at Kmart Group.

Rising dividend

As an investor who likes to receive passive income, the bigger dividend was also pleasing to see, with a 7.4% increase to $1.02 per Wesfarmers share.

Dividends could play an important part in the overall shareholder returns in the coming years. I like how Wesfarmers is balancing cash payments to shareholders, investing for growth and delivering earnings growth.

I think this could be a good time to invest in the Wesfarmers share price for the long term.

The post Why I think the Wesfarmers share price is a buy after its HY26 result appeared first on The Motley Fool Australia.

More reading

• Recap: Winners and losers from earnings season week 3
• Buy, hold, or sell? Goodman Group, Wesfarmers, Zip shares
• Everything you need to know about the latest Wesfarmers dividend
• Wesfarmers posts 9% half-year profit growth and boosts dividend
• 3 high-quality blue-chip ASX shares I would buy right now

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.