Wesfarmers shares climb as UBS backs Bunnings sales growth
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The news: Wesfarmers was one of the best performers across the ASX 200 by midday after UBS upgraded its rating on the conglomerate.
The numbers: Wesfarmers shares rose 3.1% to $77.03, extending gains of more than 30% over the last 12 months.
UBS upgraded Wesfarmers from 'sell' to 'neutral' and hiked its price target from $69 to $76.
The context: UBS analysts said that despite slowing Bunnings Warehouse growth being a concern for investors, they are confident sales growth at the hardware chain can accelerate.
They outlined three "capital light" growth drivers, including increased market share in existing categories and entry into new ones, such as camping and auto, at the expense of supermarkets. The analysts also see potential for growth in online sales, currently tracking below global peers, and a larger skew towards commercial customer sales.
Wesfarmers — owner of Bunnings, Kmart, Officeworks and Priceline retail stores — received backlash last week following its decision to wind down its e-commerce business Catch.
The source: UBS research
