Shares of Australian conglomerate Wesfarmers edged lower on Friday, extending losses from the previous session, despite the company posting a solid increase in first-half profit and lifting its interim dividend. The stock closed at A$83.99, down 0.3%, adding to a 5.6% decline on Thursday following the release of its financial results.
Financial Performance and Dividend Details
For the six months ended December 31, 2025, Wesfarmers recorded a net profit after tax of A$1.6 billion, a 9.3% increase compared to the prior corresponding period. The company declared a fully franked interim dividend of A$1.02 per share, up from its previous payout. The ex-dividend date is set for February 24, with payment to shareholders scheduled for March 31.
Breaking down the segment performance, the Kmart Group delivered earnings before interest and tax (EBIT) of A$733 million. The Wesfarmers Chemicals, Energy & Fertilisers (WesCEF) division saw its EBIT rise to A$210 million. The results presentation highlighted the contribution from the company's lithium exposure, which some analysts noted provided a boost to the overall profit figure.
Management Commentary and Strategic Focus
Chief Executive Officer Rob Scott struck a cautious tone regarding the outlook for the remainder of the fiscal year. He pointed to uneven consumer spending patterns, noting that inflation continues to impact household budgets and that uncertainty around interest rates is weighing on sentiment. To maintain competitiveness and customer loyalty, Wesfarmers is implementing strategic price reductions across its retail portfolio.
Scott emphasized that these price investments are being funded through ongoing productivity improvements and an expanded use of artificial intelligence across operations. Chief Financial Officer Anthony Gianotti reinforced this strategy in a separate briefing, stating the company's priority is to "reinvest productivity gains back into delivering lower prices for customers." He also highlighted new technology partnerships with Microsoft and Google to accelerate the group's AI capabilities.
Analyst Reactions and Price Targets
Market analysts provided mixed assessments following the result. UBS maintained a Neutral rating with a price target of A$90. Morgans kept its Add rating, slightly increasing its target to A$80.50. JPMorgan remained more pessimistic, reiterating an Underweight rating and a A$72 target. Its analysts suggested the earnings strength was driven more by non-core segments, such as lithium, rather than the fundamental retail business.
The divergent views reflect broader investor concerns about whether Wesfarmers can sustain volume growth through discounting without excessively pressuring retail margins. The company's extensive portfolio, including Bunnings and Kmart, makes it a key bellwether for Australian consumer health, and its performance is closely watched for signs of economic resilience or stress.
Market Context and Forward Risks
The report arrives during a tense earnings season where investors are quick to punish any perceived weakness in forward guidance. While the first-half result was robust, the lack of a strongly upgraded outlook for the second half left the market wanting more reassurance. Traders are now focused on the upcoming ex-dividend date and whether the company's price-led strategy can defend market share.
Key risks for Wesfarmers include a potential further pullback in consumer spending, which could squeeze retail margins more severely. Additionally, any slowdown in lithium earnings could remove a recent profit tailwind at a time when the core retail divisions face headwinds. Persistent cost inflation or a delay in expected interest rate cuts would also challenge the company's operational model and its current market valuation.
Investor attention will now shift to the execution of Wesfarmers' productivity and AI initiatives to fund its customer value proposition. The success of this strategy in navigating an uncertain economic environment will likely determine the stock's trajectory in the coming months.