Wesfarmers - H1 FY2026 Earnings Analysis

Performance Highlights

Wesfarmers reported revenue of $24,212 million for the half-year ended 31 December 2025, up 3.1% on the prior corresponding period, with NPAT increasing 9.3% to $1,603 million and basic EPS rising to 141.4 cents. EBIT grew 8.4% to $2,493 million, underpinned by broad-based earnings improvement across the Group's largest divisions and a return on equity of 32.7%. Bunnings and Kmart Group were the primary earnings engines, contributing $1,388 million and $683 million in divisional earnings respectively, with both businesses delivering operating leverage through sustained productivity discipline and everyday low-price strategies. WesCEF added meaningfully to the Group result, with earnings up 18.1% to $209 million, driven by a positive lithium contribution as spodumene concentrate pricing improved and the Kwinana refinery reached first product in July 2025.

Management Outlook and Forward Catalysts

Management reaffirmed its long-term focus on satisfactory shareholder returns, guiding to full-year net capital expenditure of $1,000 million to $1,300 million and flagging that Kmart Group's sales growth in the first six weeks of the second half was tracking ahead of the first half. Officeworks faces a deliberate short-term earnings drag from its transformation program, with approximately $25 million of one-off costs expected in the second half, but management anticipates structural cost-base benefits flowing through to earnings from FY2027. WesCEF's lithium earnings in the second half are expected to be slightly ahead of the first half, with the majority of spodumene concentrate production contracted, though the refinery ramp-up timeline has been extended to resolve intermittent odour issues. The central investor debate for the next quarter centres on the pace and credibility of the Covalent Lithium refinery ramp-up alongside the execution risk in Officeworks' transformation, while bulls will focus on Kmart's accelerating second-half sales momentum, OnePass membership growth and the potential earnings uplift from new AI partnerships with Microsoft and Google Cloud.