Wesfarmers (ASX:WES): It thrived when inflation was at 40-year highs; but is worried about the threats of crime and new taxes?

As retailers announced downgrades left right and centre during the cost of living crisis, Wesfarmers (ASX:WES) was an exception. Its shares gained 120% between mid-2022 and mid-2025.

This was no accident. It is has a very diverse revenue mix, with several non-discretionary categories, along with several growth opportunities down the track.

But it is a new era now with inflation moderating. While some analysts and investors argue we are in a Goldilocks situation, Wesfarmers wouldn’t see it that way…or at least they wouldn’t suggest there are not any threats. Namely: Crime and tax.

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Who is Wesfarmers?

Wesfarmers is a $80bn conglomerate that has interests in retail, industrials, chemical and fertilisers. It was founded as a WA farmers co-op in 1914 and was ASX listed in 1984. Since then, it has an impressive track record of growth that speaks for itself.

The company’s most famous holdings include Bunnings, Officeworks, Kmart and Target. But it also hosts a chemicals and fertilisers business, an industrial and safety products business, a joint-venture mining operation at the Mt Holland lithium project in WA, as well as other consumer facing businesses, buying Priceline owner Australian Pharmaceutical Industries (ASX:API) in 2022 and bidding for Silk Lasers (ASX:SLA) in 2023.

It’s almost a case of what Wesfarmers doesn’t own rather than what it does. A couple of instances include Coles, which was owned between 2007 and 2018 until it was demerged, and insurance broking.

The company made headlines earlier this week when it announced it was closing online retailer Catch Group, 5 and a half year after buying it for $230m. Catch had a brief period of success during the pandemic as people shopped online, but was never profitable and losses quickly caught up with it. 33% of its staff and all its fulfilment centres will be redeployed to Kmart. It just couldn’t compete with Amazon, Temu and Kogan.

But of all its assets, Bunnings is the biggest earner with $19.6bn of the $45.6bn revenue and $2.3bn of the $4.2bn in divisional earnings (EBIT) in FY25. The next biggest contributor, KMart, made $11.4bn revenue and $1bn earnings.

Wesfarmers has a lot going for it

OK, not everything it holds is inflation-proof but plenty of it is. Companies like Baby Bunting (ASX:BBN) reported that money-strapped consumers are moving to discount retailers. People want lower prices and value in a way they haven’t since the GFC and Wesfarmers was able to provide it.

The company is continuing to invest in itself, modernising its supply chains with new fulfilment centres. There’s plenty of new initiatives including the rolling out a pets range in Bunnings, the integration of Silk Laser clinics as well as the first sales of lithium concentrate from Mt Holland in early CY24.

It is one of the few companies that was pandemic beneficiary that may not be a loser. It recorded 35% sales growth over the COVID years and has ended up with 13,000 more staff across its retail business alone.

A Stellar FY23, a Standstill FY24, then a better FY25

It closed FY24 with $44.2bn in revenue, only 2% higher than FY23, although FY23 was 18% higher than FY24. The company’s profit came in at $2.6bn, up 4% from the year before, and it paid $1.98 per share in dividends compared to $1.91 the year before.

In FY25, the company made nearly $46bn revenue (up 3.4%), $4.2bn EBIT pre-significant items (up 5%) and a profit of $2.9bn on a statutory basis and $2.7bn on a statutory basis (up 14% and 4%) respectively. The company’s ROE was 34.3% and its free cash flow was $3.4bn, up 7%. It paid $2.06 per share in dividends, up 4%.

The company employs 109,000 people and supports 1.5m B2B customers. It paid $1.5bn in taxes, implying a 38% rate (30% corporate tax and 8% payroll), and it made $96.5m in community contributions. And total shareholder returns including dividends and buybacks, was $4bn, supporting 480,000 investors.

ESG investors don’t fret, you’re accounted for too! The company employed nearly 100 more Aboriginal and Torres Strait Islander team members (with 4,163 up from 3,689 2 years before) and reduced Scope 1 and 2 emissions from 1,196.7kt CO2 2 years ago to to 1,026.6kt. The percentage of waste diverted from landfill has been above 70% for a few years now and has 50% women in Board and Leadership positions.

But the goings are now getting tough

Wesfarmers makes the headlines a lot, often because it is seen as a big company trying to make out it has it much harder than it does. Remember when the company cried poor when the Fair Work handed down a 5.75% pay rise to workers on the minimum wage – CEO Rob Scott publicly warned that it would undermine investment.

Are Wesfarmers unfairly crying poor? We don’t think so. But it is inevitable that wages will rise and labour costs represent the highest cost to retailers. Ironically, it agreed to provide a 10.5% pay rise to its 40,000 Bunnings employees over the following 3 years.

And keep in mind that labour costs don’t begin and end with wages paid. Lower productivity since the pandemic – due to labour shortages, working from home and absenteeism – have been additional costs. Workplace regulations in Canberra and payroll taxes in Victoria will hurt too.

At its AGM last week, the company noted 2 things it has talked about in the past, but clearly won’t stop talking about until something is done. The first is on tax where it inevitably thinks taxes should be cut. But it wants above all else, the mere proposal to give businesses the choice to pay either 30% or 20% plus a 5% cash flow tax is killing investment.

The second is on retail crime, particularly in Victoria. Wesfarmers told investors there had been 13,500 threatening incidents in the last year, including over 1,000 physical assaults. In one instance, a repeat offender attacked staff at the same store three days in a row. It has called for action, including amending privacy laws to allow the use of facial recognition in stores – which it did until the Privacy Commissioner ruled it breached consumer rights.

Overpriced?

There are 13 analysts covering Wesfarmers and the mean target price is $82.25, compared to the $87.12 intraday price on Thursday October 30, 2025

Granted, there is a significant divergence of opinions among the analysts – the lowest price is $58 but the highest is $100.  Yes, analysts expect a retreat. In FY27, analysts expect $49.7bn revenue and a $3.2bn profit.

Let’s turn to Wesfarmers’ multiples. For FY26, it is trading at 37.5x P/E and 4.5x PEG. This is based off $47.3bn revenue and a $2.8bn profit.

High multiples in anyone’s books. Yet, maybe you’re getting what you pay for considering you’re clearly not going to get a 10-20% plunge in sales and/or profits.

So is Wesfarmers a safe haven?

If you’re looking for a retail stock where you won’t see a fall in sales, yes Wesfarmers is a safe haven. But if you are looking for a growth stock, this may not be the best option for you. There are better opportunities in the tech and resources spaces (yes even amongst large caps) that represent growth opportunities.

As with any stock, investors looking at Wesfarmers need to consider their personal circumstances, objectives as an investor as well as do further due diligence beyond this article. This being said, hopefully we have given you food for thought to conduct further research.