Why Did the Wesfarmers Share Price Fall Today?

What Happened to the Wesfarmers Share Price?

Wesfarmers Limited [ASX:WES] is a diversified conglomerate. The company operates chain supermarkets, liquor shops, home improvement and office retails stores, such as Bunnings and Officeworks, as well as mid-market department chain Target and the discount retailer Kmart.

Also under their umbrella are insurance and financial services, two coal mines, and a chemical and fertiliser division. They even have interests in industrial and safety products and services to the mining industry.

The share price closed 0.31% lower on Wednesday.

Why Did This Happen to Wesfarmers Shares?

In spite of the broader market trading high today, Wesfarmers shares continue to trend downwards.

It’s worth noting that the stock has been in a sideways trend since November 2013, and is now sitting at the bottom of this trading range. The share price hasn’t fallen below $41. Aside from a break out to $46.95 when first half results were announced a month ago, the stock hasn’t traded above $45.60.

The company is stuck in this range for now. Given its retail investments, Wesfarmers really needs a pick-up in consumer spending to see it bust above this trading range.

Wesfarmers shares currently trade around $41.30

What Now for WES Shares?

One of the most overlooked troubles for Wesfarmers is discount retailer Target.

Target has had a revolving door of top level management for several years. However current CEO Stuart Machin may finally be the boss to deliver.

He has spent the past two years digging into the business to pinpoint exactly what will turn the retailer around.

Truthfully, Target is a disaster of a business. Machin recently admitted that the retailer will only know where all its stock sits as of June this year.

To transform the business, Machin says the basics will be fixed this financial year. And growth and business efficiencies will start over the next two years. If everything goes to plan, the hard work will be evident in the 2018 financial year.

Basically, the company is copying Kmart’s model. Less product range, higher prices, fewer sale periods. In other words, teach customers how to pay full price for items while offering less stuff to buy.

Wesfarmers has diverse business interests and could be a reasonable punt on the Aussie economy.

Shae Smith
Editor, Money Weekend

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Since starting out in the financial markets over a decade ago, Shae has extensive experience across various aspects of the industry. Shae cut her teeth in the derivatives industry, teaching clients basic trading techniques with technical analysis.

Joining Fat Tail Investment Research eight years ago, Shae has worked across a number of publications, such as Australian Small-Cap Investigator, Gold Stock Trader and Microcap Trader. She’s spent the past two years however, honing her macro analysis skills alongside Jim Rickards, showing Australians how to invest and profit form global macro trends.

Drawing on her extensive experience, Shae is a contributor to Money Morning, and lead editor of sister-publication Markets & Money, where she looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.


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