Wesfarmers Delivers First-Ever Lithium Profit as Bunnings Prepares for Leadership Handover and New Store Format Bets Pay Off
FY2026 full-year results call, August 26, 2026
Wesfarmers closed out its 2026 fiscal year with net profit after tax of $2.9 billion, up 8.3% excluding prior-year significant items, but the headline number was arguably overshadowed by two structural developments: the lithium business turned profitable for the first time, and Bunnings Group is about to change leadership for the first time in years. Managing Director Rob Scott announced that Mike Schneider will retire as Bunnings MD in February 2027, to be succeeded by Rachael McVitty, currently Chief Customer Officer overseeing the retailer's store network and more than 50,000 team members. The succession, following what Scott called "the usual process adopted by Wesfarmers over years," underscores the conglomerate's bench strength but also puts a fresh face atop its largest earnings contributor at a moment when Bunnings is absorbing the newly merged Industrial and Safety division.
Lithium Turns the Corner
WesCEF's lithium unit delivered its first positive earnings result, a $40 million profit, driven by above-nameplate production at the Mt Holland mine and concentrator and stronger spodumene pricing. CFO Aaron Hood was notably upbeat about the year ahead, telling analysts that with Mt Holland now running at nameplate capacity, "you're getting a good cost position as a result of that at unit costs," and that the company has already locked in material FY2027 spodumene sales at current spot pricing. The refinery ramp-up, however, hit an unexpected snag: intermittent odor issues delayed qualification activities, with mitigation measures only initiated late in the fiscal year. Management's hedge against a slower-than-expected hydroxide ramp is straightforward — excess spodumene simply gets diverted to the profitable spot market. "That's the benefit of a vertically integrated operation," Hood said. "We have that flexibility embedded in the business model that we can quickly allocate any spare spodumene tonnes at good profitable margins at the moment into the spot market." On accounting mechanics, Hood confirmed refinery costs above the long-run mature cost estimate are being capitalized rather than expensed during ramp-up, with no catch-up amortization once the switch to expensing occurs — the capitalized amount will simply depreciate over the asset's life.
Kmart's Fulfillment Center Will Bite Into FY2027 Margins
Wesfarmers flagged a concrete, if unquantified, earnings headwind for the coming year: Kmart Group takes over its new next-generation fulfillment center in New South Wales in October, triggering a period of dual-running costs with zero offsetting benefit until the facility becomes operational in early FY2028. Divisional CEO Aleksandra Spaseska was direct about the impact: "We haven't quantified the impact of that, but clearly, it's a material enough impact to call out. What it will do is it will impact our ability to deliver operating leverage to the same degree as we have in recent years." Despite the drag, Kmart still expects to grow earnings in FY2027 and deliver earnings growth ahead of sales growth, though the scale of that outperformance will be constrained versus recent years.
K Home Format Shows Early Promise, Second Store Coming to Queensland
Kmart's new K Home concept, running for a few months at its Box Hill pilot, is generating stronger-than-expected furniture penetration and basket sizes, according to Spaseska, who noted "very strong cross-shop with furniture in a lot of the baskets in the store" and good uptake of the company's value-tier price points. A second K Home store opens in Queensland in November, chosen deliberately for its different catchment profile to stress-test the format across demographics. Management said sales density is the key economic metric it needs to prove out before committing to a wider rollout, and that a handful of stores across different catchment types would be needed to build confidence. Supply chain is not currently a constraint, with existing Victorian facilities able to support additional trial stores.
Marketplace and Retail Media Scale Up, Still Early
Gross merchandise value across the Bunnings and Kmart marketplaces topped $250 million for the year, with combined marketplace sales growing more than 70%, according to Scott, who emphasized these are profitable sales for the group. Bunnings marketplace alone now spans 310,000 SKUs and 616 partners, appearing in roughly 25% of all online shopping baskets, and is set to launch in New Zealand next month. Retail media remains nascent — Schneider said the business has under 600 screens across the store fleet and has been running for only about 12 months — but he pointed to traction with both endemic suppliers and non-endemic brands such as Toyota and American Express. Scott was candid that the segment is "not material to earnings at this point in time," positioning it as a multi-year rather than near-term earnings driver.
WesCEF's Core Chemicals Business Set Up for a Positive FY2027
Despite some analyst concern that WesCEF's non-lithium businesses face mounting headwinds, Hood pushed back, characterizing FY2027 as "a year where we start to harvest a lot of the benefits of capacity expansions and work that's been underway for the last few years." Ammonia index pricing, which spiked following escalation of the Middle East conflict and hurt second-half chemicals earnings due to contract price lags, is expected to normalize and provide a tailwind into FY2027. The sodium cyanide expansion, adding roughly 30,000 tonnes of capacity, completes by Christmas 2026, with a full benefit landing in FY2028 but partial uplift already flowing in FY2027. Ammonium nitrate margins are also improving as industry supply-demand rebalances, aided by strong Pilbara iron ore production and a newly renewed multi-year customer contract.
Consumer Still Value-Focused But Not Deteriorating
Management pushed back against suggestions of a demand slowdown, characterizing conditions as "a continuation" rather than a "worsening" of trends seen throughout calendar 2026. Spaseska described customers as increasingly deliberate, noting fewer items per basket even as active customer counts and transaction volumes keep growing. Bunnings sales growth in the first seven weeks of FY2027 was slightly ahead of the second-half FY2026 pace, aided by unseasonably dry July weather, while Kmart tracked broadly in line and Officeworks grew slightly below its second-half rate. Schneider dismissed concerns tied to weaker housing churn and post-budget lending data, saying "we haven't seen anything noticeable post budget" and pointing to elevated owner-occupier home equity levels supporting ongoing renovation spend.
Divisional Scorecard and Capital Allocation
Bunnings earnings (excluding property) rose 5% to $2.45 billion; Kmart Group earnings grew 6% to $1.1 billion; WesCEF jumped 18.5% to $473 million. Officeworks earnings fell 22.2% to $165 million, hit by roughly $40 million of one-off transformation costs, with the restructuring program on track for completion by year-end. Wesfarmers Health earnings rose 12.2% to $92 million, with Priceline Pharmacy network sales up 12.7%. The board declared a fully franked final dividend of $1.20 per share, bringing the full-year total to $2.22, up 7.8%. Net financial debt rose to $5.3 billion following December's $1.7 billion capital return, pushing the debt-to-EBITDA ratio to 1.9x — though S&P's July revision of its downgrade threshold from 2.75x to 3x gives the group additional headroom. Net capital expenditure guidance for FY2027 sits at $1.3 billion to $1.5 billion, including roughly $200 million tied to the Mt Holland expansion announced in July.