In major news on Australian stocks, Wesfarmers Limited’s (AU:WES) hardware unit Bunnings Warehouse has been reportedly accused of abusing its market dominance. As per ABC News, Bunnings’ suppliers have stated that the company is pressuring them into signing unfair contracts, leading to more losses. Bunnings, however, is disputing some of the allegations and encouraging its suppliers to communicate directly with the company to address any problems.
On Monday, in the early trading hours, Wesfarmers shares notably underperformed the ASX 200. Later on, they recovered and ended the day at a loss of 0.075%.
Wesfarmers owns a diverse portfolio of businesses, including retail, industrial products, beauty, and fertilizers. Bunnings Warehouse has been owned by Wesfarmers since 1994. Bunnings is one of the leading retailers of home improvement, outdoor living, and building products in Australia and New Zealand.
Wesfarmers’ Bunnings Faces Allegations
Bunnings is currently facing a Senate inquiry into its pricing policies in supermarkets. As part of the inquiry, several plant suppliers have come forward to raise their issues against the company.
Recently, the company’s key supplier, Boomaroo Nurseries, ended its contract after working together for 11 years. The supplier raised issues like revenue loss, no price hikes, and no guaranteed orders. Another supplier said that it felt like a “slave” while working with the company.
On the other side, Bunnings has highlighted its positive relationship with multiple growers and is collecting letters from them to substantiate this claim. Moreover, many suppliers have come forward in support of the company and feel the concerns are one-sided.
Is Wesfarmers a Good Stock to Buy?
Year-to-date, Wesfarmers stock has gained nearly 16%. This was mainly driven by the company’s strong performance in the first half of FY24, along with a dividend hike. Wesfarmers reported a 3% year-on-year increase in net profit after tax, reaching AU$1.43 billion in the first half. Consequently, the company announced a 3.4% year-on-year increase in its interim dividend to AU$0.91 per share.
On TipRanks, WES stock has received a Hold rating based on five Hold, one Buy, and three Sell recommendations from analysts. The WES share price target is AU$56.43 which is 15.2% below the current trading levels.
