Wesfarmers eyes off acquisition targets as economy puts companies under pressure

Wesfarmers is ready to pounce on businesses being squeezed by rising interest rates and a tougher economy.

The conglomerate’s chief executive, Rob Scott, says Wesfarmers’ busy and large business development team is “drilling a bit deeper” on potentially stressed acquisitions that could fit the Perth-based company.

“We do find that during the tougher economic times, especially as interest rates go up and companies that are heavily debt-funded get themselves into a bit of trouble, that’s often when some of the best investment opportunities arise,” he said.

“We’re certainly not wishing for economic conditions to get tougher or interest rates to rise, but if they do, Wesfarmers by virtue of its diversified portfolio and very strong balance sheet would be well positioned to take advantage of that,” he said.

“(The business development team) are digging a bit deeper, but we will be very cautious and very disciplined”, Mr Scott said, particularly given an abundance of identified growth opportunities within Wesfarmers’ retail, lithium and chemical businesses.

Mr Scott was speaking on the sidelines of the Wesfarmers annual general meeting in Perth on Thursday, which maintained its ranking as the city’s biggest AGM by drawing about 1400 shareholders and guests.

By the time they took their seats, Wesfarmers shares were closing more than 4 per cent lower off the back of the group’s AGM trading update, which revealed that Bunnings’ sales had “moderated” in recent weeks after the hardware chain’s strong start to the 2026 financial year.

Mr Scott attributed the slowdown to rising inflation, growing cost-of-living pressures, this month’s interest rate rise and the prospect of a fifth for the year in November, but he warned about reading too much into a few weeks’ trading.

“You can understand in that context the market is hearing a bit of negative news,” he said.

“But we have demonstrated in the past that Wesfarmers’ businesses, particularly Bunnings and Kmart, tend to perform quite well in relative terms in difficult trading conditions.”

Mr Scott also suggested some customers were holding back to await Black Friday discounts next month.

“But clearly, many customers are doing it tough,” he said.

The AGM was the last for Michael Chaney, Wesfarmers’ chair of the past 11 years, who was succeeded at the completion of the meeting by former Amcor boss and BHP’s immediate past chair, Ken MacKenzie.

Domiciled in Melbourne, the Canadian-born Mr MacKenzie will be the first Wesfarmers chair to live outside of WA. He will maintain an office in Melbourne during his tenure.

Mr Chaney used his last address to renew his warnings about the economic challenges facing Australia and the populist “race to the bottom” in immigration.

“Our economy is facing headwinds – low growth, weak productivity, dismal confidence and limited ambition or capacity for reform,” he told shareholders, lamenting the failure of government to act on tax reform or the country’s weak productivity.

“Company and personal income tax rates are still too high, and given the state of the budget, lowering them requires governments to stand back and restructure Federal and State taxes together,” Mr Chaney said.

“It is also of real concern that, increasingly, populist approaches by governments and opposition parties take precedence over effective policies.

“A prime example is the race to the bottom on immigration policy.”

He said curbs on immigration would deprive the country of the casual workers on whom the care, hospitality and agricultural sectors depended, and create further funding problems for higher education by limiting international students.

“These aren’t just problems for business. If confidence stays low, productivity stays weak, we fail to effect real reform and bow to populist pressures, investment will stall and go elsewhere.

“In the end, that will hurt us all.”

While Mr Scott called out the recent weakness in retail, Wesfarmers’ chemical, energy and fertilisers division is set for a strong first half, helped by higher ammonia prices, recent volume expansions and better prices for the spodumene produced by the Covalent joint venture’s Mt Holland lithium mine.

The mine feeds a lithium hydroxide refinery south of Perth, which is still in the midst of a protracted ramp-up that has been delayed by odour problems at the plant.

“We are working on a number of engineering solutions that we are very confident will address the issues in a categorical way, but it just takes time,” Mr Scott said.

The Wesfarmers plant is being closely watched by investors given the disastrous operating problems which have prevented China’s Tianqi reaping commercial production from a similar plant in Kwinana.

But Mr Scott again insisted that Wesfarmers was comfortable with the commissioning.

“The plant is actually performing very well operationally,” he said.

Wesfarmers shares lost $3.12 to $74.02 to revalue the group at $84 billion. The stock is down 9.4 per cent for 2026, against the 1.9 per cent gain recorded by the S&P-ASX200.