Wesfarmers (ASX:WES) outlined a higher interim profit and dividend for the 2026 first half, pointing to solid performances in its largest retail divisions and sharp earnings improvement from newer growth platforms in lithium and health. Management also emphasized ongoing productivity initiatives, a stepped-up focus on technology (including generative and “agentic” AI), and continued investment to support everyday low prices in a still-challenging cost-of-living environment.
Half-year profit rises, interim dividend increased
Chief Executive Officer Rob Scott said net profit after tax rose 9.3% to AUD 1.6 billion, underpinned by strong earnings contributions from Bunnings and Kmart and “significant improvement” in lithium and health. He said the group’s results reflected “strong operating performance and disciplined execution,” with productivity initiatives helping businesses mitigate cost pressures while keeping prices low.
Divisional performance: Bunnings and Kmart lift, Officeworks down on transformation costs
Gianotti said divisional earnings increased 6.8% in the half, supported by Bunnings, Kmart Group, and WesCEF, along with momentum in health. All divisions grew earnings except Officeworks, which management attributed largely to costs related to a transformation program.
- Bunnings: Sales increased 4%, with growth across all product categories and regions and in both consumer and commercial segments. Excluding the net impact of property contributions, earnings increased 5% to AUD 1.39 billion. Management highlighted continued growth in digital sales, a completed rollout of a new warehouse tool shop format to 283 stores, and productivity improvements enabled by rostering, supply chain initiatives, and technology. In Q&A, Bunnings Managing Director Mike Schneider said the business invested over AUD 120 million into price in the half, up from about AUD 108–109 million in the prior corresponding period.
- Kmart Group: Earnings rose 6.1% to AUD 683 million. Management said Kmart benefited from strong value credentials and the Anko range, including product innovation in “one-up and two-up” price tiers. Target sales were lower, impacted by difficult apparel trading conditions, a later start to summer, and the forced closure of a Target distribution center in Queensland due to a severe weather event that reduced availability.
- Officeworks: Sales increased 4.7%, but earnings of AUD 68 million were AUD 19 million below the prior period, consistent with earlier guidance. Earnings included AUD 15 million in one-off costs tied to the transformation program, mainly restructuring and ERP-related costs. Gianotti said a further AUD 25 million in one-off costs is expected in the second half, reflecting continued restructuring and higher ERP spend, with benefits expected to begin to positively impact earnings in FY2027.
Lithium and health: first positive lithium contribution; Priceline network sales grow
WesCEF earnings increased 18.1% to AUD 209 million, with management noting a positive contribution from the lithium business for the first time. Gianotti said lithium earnings of AUD 6 million reflected strong operating performance from the mine and concentrator, including above nameplate capacity toward the end of the half, alongside a more favorable pricing environment.
Management said Covalent’s lithium hydroxide refinery achieved first product and has produced “high-quality product,” indicating the underlying process is operating as intended. However, production ramp-up has been affected by intermittent odor issues, with engineering works underway and due to be completed by mid-calendar year. While ramp-up continues, WesCEF is selling excess spodumene concentrate profitably.
In the health division, earnings were AUD 38 million, including AUD 7 million of amortization expenses. Excluding amortization and restructuring costs in the prior period, earnings increased 9.8%. Management said Priceline Pharmacy headline network sales increased 14.4%, supported by network expansion and initiatives including promotional campaigns, investment in everyday value lines, differentiated skincare and beauty products, and an expanded private label range. The company also highlighted improved wholesale performance, supported by new customer acquisitions, increased volumes from existing pharmacy partners, and demand in weight loss and high-value drug categories.
Cash flow, balance sheet, and capital spending
Divisional operating cash flows were broadly in line with the prior period, with divisional cash realization of 103%. At the group level, operating cash flows decreased 3.3% to just under AUD 2.5 billion, primarily due to higher tax paid. Free cash flows increased 35.6% to AUD 2.75 billion, largely due to proceeds from the sale of Core Gas and the sale of Wesfarmers’ 100% interest in BWP Management Limited during the half.
Gross capital expenditure was AUD 619 million, up 4.2%, reflecting investment in new omni-channel supply chain facilities in Kmart Group and Officeworks, partly offset by reduced WesCEF spend after completion of construction of the Kwinana lithium hydroxide refinery in FY2025. For FY2026, management expects net capital expenditure (excluding BPI sale proceeds) of AUD 1.0 billion to AUD 1.3 billion.
Net financial debt increased to AUD 4.9 billion following shareholder distributions. The average cost of funds decreased to 3.6% from 3.8%, and the weighted average debt term to maturity remained 4.5 years. Gianotti said higher net debt would lead to higher average net debt and finance costs in the second half, but the group maintained investment-grade credit ratings and had around AUD 1.3 billion in available committed, unused bank facilities at period end.
Outlook: retail trading “continued to trade well,” lithium second half seen slightly higher
Scott said Australian consumer demand was “solid,” but cost-of-living pressures are uneven and uncertainty around inflation and interest rates is affecting sentiment. For the first six weeks of the second half, the group’s retail divisions “continued to trade well,” with Bunnings and Officeworks sales growth broadly in line with the first half and Kmart Group sales growth stronger than the first half.
On lithium, management expects the refinery ramp-up to be extended due to the odor issue, but said WesCEF has flexibility to sell excess spodumene concentrate. Based on customer contracts for the majority of spodumene in the second half, management said second-half lithium earnings are expected to be profitable and “slightly above” the first half, with improvement driven mainly by mine performance and the pricing environment.
Management also highlighted a continued focus on productivity across the group, including expanding use of AI tools. In the Q&A, Schneider cited Bunnings initiatives such as an AI price markdown tool and internal chatbots, describing a shift from experimentation to scaled deployment across the enterprise.
About Wesfarmers (ASX:WES)
Wesfarmers Limited engages in the retail business in Australia, New Zealand, and internationally. The company is involved in the retail sale of building materials, home and garden improvement, lifestyle, and outdoor living products; apparel and general merchandise, including toys, leisure, entertainment, home, and consumables; and office products and solutions, such as stationery, technology, furniture, art supplies, and learning and development resources, as well as print and create, and technical support services through its Officeworks stores.
