Wesfarmers Flags Potential Price Hikes Amidst Currency Depreciation and Tariff Concerns
Australian retail giant Wesfarmers has hinted at the possibility of price increases as the weakening local dollar inflates supply costs. The company also expressed concerns that U.S. President Donald Trump's tariffs could fuel further inflation.
Wesfarmers, which owns Bunnings and Kmart, highlighted challenges in the housing sector and geopolitical headwinds as factors contributing to the elevated cost of living. CEO Rob Scott noted that these issues are not likely to dissipate quickly.
Despite a slight increase in first-half profit driven by resilient demand at Bunnings and increased popularity of Kmart, Wesfarmers maintained a cautious tone. The company emphasized the potential "second order impacts" of Trump's tariffs, which include inflationary pressure and inhibited economic growth.
A weaker Australian dollar, attributed in part to tariff concerns, is expected to increase the cost of imported goods by mid-2025. Wesfarmers stated that it will explore ways to mitigate these cost pressures to minimize the need for significant price adjustments.
Net profit for the six months ending December reached A$1.47 billion, exceeding analyst expectations. The positive performance was primarily driven by a 3.1% rise in pre-tax profit at Bunnings, Wesfarmers' key revenue generator.
Jefferies analysts commended Wesfarmers' financial results and cited the resilience of sales and successful cost-cutting measures. The company reaffirmed its plans to commence lithium production at its joint venture with SQM in mid-2025, with Scott indicating that the project remains profitable even amidst declining lithium prices.
Wesfarmers declared an interim dividend of A$0.95 per share, up from the previous year's A$0.91.