Australia’s Wesfarmers sees tariff inflation threat as revenue beats forecast

By Byron Kaye and Sameer Manekar

(Reuters) – Australia’s largest non-food retailer Wesfarmers stated it could elevate costs as a comfortable native greenback drives up provide prices and warned on Thursday that tariffs ordered by U.S. President Donald Trump could spur inflation.

The proprietor of Australia’s largest {hardware} chain, Bunnings, and funds division retailer chain Kmart additionally stated the nation’s first rate of interest reduce in 5 years, introduced this week, would assist households however alone couldn’t finish excessive dwelling prices nor offset wide-ranging geopolitical headwinds.

“You simply want to take a look at a few of the challenges within the housing sector which are pretty nicely understood and reported,” Wesfarmers CEO Rob Scott advised journalists. “These usually are not going away rapidly.”

The evaluation introduced a cautious tone to an in any other case well-received buying and selling replace during which the Perth-based conglomerate stated first-half revenue rose barely greater than analysts forecast on resilient demand at Bunnings and a surge in reputation with cost-conscious buyers at Kmart.

Wesfarmers shares have been 3% increased by midsession in a weaker broader market.

None of Wesfarmers’ companies, which embody a lithium venture and industrial chemical compounds, appeared straight susceptible to wide-ranging tariffs that Trump has promised, however “there are at all times the second order impacts”, Scott stated.

“Clearly tariffs may be inflationary and might inhibit financial progress.”

A weaker Australian greenback, which economists have put partly right down to concern about tariffs, would push up the price of foreign-sourced provides by mid-2025. Wesfarmers would “attempt to discover methods to mitigate these value pressures … and it might be that we are able to mitigate a few of these so the costs do not must go up as a lot”, Scott stated.

Internet revenue was A$1.47 billion ($932.13 million) for the six months to December, barely forward of a Seen Alpha consensus estimate of A$1.45 billion and the earlier yr’s A$1.43 billion, helped by a 3.1% improve in pre-tax revenue at Bunnings, the corporate’s fundamental earner.

Jefferies analysts known as the replace a “stable end result with gross sales remaining comparatively resilient and productiveness measures persevering with to offset value pressures”.

Wesfarmers reiterated its forecast {that a} lithium three way partnership with Chile’s SQM would begin producing battery-grade lithium hydroxide in mid-2025. On the decision, Scott stated the venture can be worthwhile even after a slide within the lithium worth however “clearly if there have been enhancements sooner or later in worth, then that may be useful”.

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