WES - Wesfarmers Limited

[Garpal Gumnut]

somewhere near $30-$31 will get me interested ( to add more ) i already participate in the DRP and have a comfortable amount ( for me )

good luck if you buy in at this stage

X-factor is still the fate of Office-Works ( stay , sell, IPO or slice off a new property trust )

DYOR

Something that may happen if the ALP get in is that WES pharmacies may suddenly be relocated in to COL stores.

The Pharmacy Guild which has maintained a grip on where pharmacies may operate is a Liberal led mob. Their head who is a professor was touted for a Senate spot was the rumour up her for the LNP.

So I'll be buying both on any weakness.

gg

 

[InsvestoBoy]

Something that may happen if the ALP get in is that WES pharmacies may suddenly be relocated in to COL stores.

The Pharmacy Guild which has maintained a grip on where pharmacies may operate is a Liberal led mob. Their head who is a professor was touted for a Senate spot was the rumour up her for the LNP.

So I'll be buying both on any weakness.

gg

Bit of weakness showing up today, I assume on the back of the carnage in Walmart and Target stock overnight.

 

[peter2]

All retail has been slammed. So much for it being a defensive sector.

 

[divs4ever]

All retail has been slammed. So much for it being a defensive sector.

retail tends to be flexible and adaptable ( or die a sudden death )

so MAYBE that will save them again , after some nasty dips ( am thinking APE in March 2020 when i added more @ $2.64 )

but WES was considered defensive while it still included COL , and not so sure about that now

 

[divs4ever]

so when is option expiry date ( or whatever it is this week )

 

[Dona Ferentes]

All retail has been slammed. So much for it being a defensive sector.

Nasdaq benchmark down 5.1 per cent overnight included a tumble for US retailers.

The likes of Walmart and (US) Target have cautioned in the latest quarterly earnings season about the effects on profits from rising costs as inflation bites across the US economy and supply chain kinks gum-up operations.

The US consumer discretionary sector ended the day 6 per cent lower with Target suffering its worst day since 1987 with a 25 per cent tumble after voicing worries about rising prices in its March earnings results.

“Target has been the latest big US retailer – covering both consumer staples and discretionaries – to trim its profits forecasts,” said an analyst.

 

[Dona Ferentes]

With Bunnings a majority contributor to WES, its only fair to ask if the new set of circumstances will have an even greater impact than last week's selldown (nearly 7% on Thursday)?

Comment from elsewhere:

• Surging labour and freight costs are a given
• Empty shelves during the pandemic may not translate to similar consumption patterns now
• Inflation is forcing consumers to conserve cash for groceries and essentials, and less discretionary spend
• Retailers who sell physical products have to guess what customers will buy months in advance
• The cost of running short is immediate lost revenue and market share. The cost of ending up long is registered in discounts on unpopular lines
• Retail is a low margin business. It requires careful management of working capital and supply chains. The smallest errors ripple through to profitability and cash flow.

Probably applies across the board; staples have more attraction in the current uncertainty.

 

[Garpal Gumnut]

With Bunnings a majority contributor to WES, its only fair to ask if the new set of circumstances will have an even greater impact than last week's selldown (nearly 7% on Thursday)?

Comment from elsewhere:

• Surging labour and freight costs are a given
• Empty shelves during the pandemic may not translate to similar consumption patterns now
• Inflation is forcing consumers to conserve cash for groceries and essentials, and less discretionary spend
• Retailers who sell physical products have to guess what customers will buy months in advance
• The cost of running short is immediate lost revenue and market share. The cost of ending up long is registered in discounts on unpopular lines
• Retail is a low margin business. It requires careful management of working capital and supply chains. The smallest errors ripple through to profitability and cash flow.

Probably applies across the board; staples have more attraction in the current uncertainty.

This is a reasonable concern for holders of WES.

Including yours truly.

I believe I'll stick with them though.

gg

 

[divs4ever]

With Bunnings a majority contributor to WES, its only fair to ask if the new set of circumstances will have an even greater impact than last week's selldown (nearly 7% on Thursday)?

Comment from elsewhere:

• Surging labour and freight costs are a given
• Empty shelves during the pandemic may not translate to similar consumption patterns now
• Inflation is forcing consumers to conserve cash for groceries and essentials, and less discretionary spend
• Retailers who sell physical products have to guess what customers will buy months in advance
• The cost of running short is immediate lost revenue and market share. The cost of ending up long is registered in discounts on unpopular lines
• Retail is a low margin business. It requires careful management of working capital and supply chains. The smallest errors ripple through to profitability and cash flow.

Probably applies across the board; staples have more attraction in the current uncertainty.

also there are all sorts of disruptions in the building industry ( Bunnings presents itself as a wholesale/retail outlet so a fair chunk of those customers are building industry professionals ) the home improvement ( and house-flipping ) game can only do so much when incomes come under pressure , a lot of that is because of regulations limiting what a non-tradesman can do to a property

so YES i expect a greater impact , but then i think WES is still currently over-priced

so the one BIG question i will ask myself is , what do i think a 'fair price' is for WES .. and will i add more at a price within 10% of that price

 

[divs4ever]

This is a reasonable concern for holders of WES.

Including yours truly.

I believe I'll stick with them though.

gg

i participate 100% in the WES ( and BWP ) DRP ( with no current plans to sell or reduce either of them )

if the WES price continues to drop will i add extra ( possibly later on , even WES has a couple of millstones aka K-Mart and Target , although Office-Works could either become a gem or an albatross )

i will probably stick BUT will be watching carefully

 

[sptrawler]

i participate 100% in the WES ( and BWP ) DRP ( with no current plans to sell or reduce either of them )

if the WES price continues to drop will i add extra ( possibly later on , even WES has a couple of millstones aka K-Mart and Target , although Office-Works could either become a gem or an albatross )

i will probably stick BUT will be watching carefully

Yes I'm not sure WES is making the best use of catch, it seems to be lagging behind my deals which WOW has just taken a big bite of, IMO the retail market seems to be evolving into online model I'm not sure WES is keeping pace.

IDH

 

[divs4ever]

WES has some experience outside of retail , so i would not be totally shocked if WES chased investments in water , an agricultural business , less likely to go into energy again ( unless they swallow CCE or AVL ) , or maybe into property development ( REIT or construction companies )

next report i will be checking out their war-chest rather early

 

[Dona Ferentes]

WES has a 128 page Investor Update available. Pointless to summarise. A few highlights

• Neatly and succinctly defining the multiple divisions in the Group.
• it anticipates capex spending of $900 million to $1 billion in FY 2022, including $320 million for Mt Holland lithium project.
• inventory levels in H2 of its fiscal year to remain elevated due to API, inflation and commodity price impacts and ongoing prioritisation of stock availability.
• getting to be more and more data and tech focused
• Wesfarmers Health is a work in progress (earnings will also be impacted by purchase price allocations, which will be outlined at the full year result)

To me, apart from integration within the hydra headed nature of the organinsation, a key vulnerability is the OneDigital/ Catch pathway. "To be the trusted place where Australians start their shopping journey" is good and probably necessary, but hard to quantify returns

 

[divs4ever]

yes a long read , lots of pictures , so fails the Marcus Padley test

still haven't found the bits i am looking for ( like the fate of Office-Works . i am guessing they will keep it , or at least an interest in it ... but )

 

[Gunnerguy]

With the results coming up, and currently a very Low IV Rank, is it worth a Long Straddle on WES ?

Gunnerguy

 

[Garpal Gumnut]

With the results coming up, and currently a very Low IV Rank, is it worth a Long Straddle on WES ?

Gunnerguy

In a word - Yes.

I don't do options and am a longterm holder of WES which has been good to me.

The main worry for me is a governance one with the move to Melbourne and the dangers of operating in a dodgy corporate environment tainting their founding vision as a farmers co-operative in WA with the oversight inherent in its beginnings.

WES may boom or fall, so buying a straddle would be a good move imo.

gg

 

[Dona Ferentes]

Rather foolishly, I sold my COL shares, that came through WES, last FY.

Doing the tax return, I had to work out a CGT cost base; the numbers are quite interesting

1993. ...Bought 1000 WES @ $7.50. Brokerage $150.00, Stamp Duty $22.50. Net Cost $7,672.50

As well as a steady flow of, and generally increasing, twice-yearly dividends, and the occasional special divi, there have been numerous Returns of Capital along the way

1. 12/08/1998. $0.50 a share
2. 18/12/2003. $2.50 a share
3. 18/02/2005. $1.00 a share
4. 26/11/2013. $0.50 a share . Consolidated by 0.9876 to 988 shares
5. 16/12/2014. $0.75 a share . Consolidated by 0.9827 to 971 shares

The cost base of a Wesfarmers shareholder’s Wesfarmers Post-CGT shares just before the demerger should be allocated: 71.09% to their Wesfarmers Post-CGT shares; and 28.91% to their corresponding Coles shares.

It all means the CG for the sale of COL holding is quite high (and note the Brokerage back then + Stamp Duty) . Will continue to hold the WES.

 

[sptrawler]

Rather foolishly, I sold my COL shares, that came through WES, last FY.

Doing the tax return, I had to work out a CGT cost base; the numbers are quite interesting

1993. ...Bought 1000 WES @ $7.50. Brokerage $150.00, Stamp Duty $22.50. Net Cost $7,672.50

As well as a steady flow of, and generally increasing, twice-yearly dividends, and the occasional special divi, there have been numerous Returns of Capital along the way

1. 12/08/1998. $0.50 a share
2. 18/12/2003. $2.50 a share
3. 18/02/2005. $1.00 a share
4. 26/11/2013. $0.50 a share . Consolidated by 0.9876 to 988 shares
5. 16/12/2014. $0.75 a share . Consolidated by 0.9827 to 971 shares

The cost base of a Wesfarmers shareholder’s Wesfarmers Post-CGT shares just before the demerger should be allocated: 71.09% to their Wesfarmers Post-CGT shares; and 28.91% to their corresponding Coles shares.

It all means the CG for the sale of COL holding is quite high (and note the Brokerage back then + Stamp Duty) . Will continue to hold the WES.

We did the same, but sold COL into the SMSF, it was an interesting exercise, but at least now we have a cost base for WES, after a zillion years of dividend re investment.
I said to the wife, staple all that together and put a date on it. ?

 

[Dona Ferentes]

We did the same, but sold COL into the SMSF, it was an interesting exercise, but at least now we have a cost base for WES, after a zillion years of dividend re investment.
I said to the wife, staple all that together and put a date on it. ?

Too true, @sptrawler ; how necessary it is to keep records AND keep it simple.

Looking back at WES, I had a few DRPs 2001 and 2002 which were transferred to SMSF, then a trade, plus two sets of rights issues (AND note the big diff around the time of the GFC - amazing how the 2nd offer was 60% lower in just 9 months.) ; these last issuances were also transferred to SMSF at an advantageous price ...

1. 18/06/2004 BUY 150 @ $28.55,
2. 28/02/2006 SOLD 150 @ $36.47,
3. 02/06/2008 RIGHTS 132 @ $29.00.
4. 03/03/2009 RIGHTS 428 @ $13.50.
5. 03/03/2009 Oversubscribe 172 @ $13.50.

 

[sptrawler]

Too true, @sptrawler ; how necessary it is to keep records AND keep it simple.

Looking back at WES, I had a few DRPs 2001 and 2002 which were transferred to SMSF, then a trade, plus two sets of rights issues (AND note the big diff around the time of the GFC - amazing how the 2nd offer was 60% lower in just 9 months.) ; these last issuances were also transferred to SMSF at an advantageous price ...

1. 18/06/2004 BUY 150 @ $28.55,
2. 28/02/2006 SOLD 150 @ $36.47,
3. 02/06/2008 RIGHTS 132 @ $29.00.
4. 03/03/2009 RIGHTS 428 @ $13.50.
5. 03/03/2009 Oversubscribe 172 @ $13.50.

Yes the GFC was the biggest over reaction con job I've ever seen, WES was a magic pickup then, so was CSL $27 and MQG $15.
Nothing like a crisis, to tighten sphincters and release value. ?