The Wesfarmers Ltd (ASX: WES) share price is down 10% today and it has dropped 28% since the start of the falls.
It's rare to see such a large fall for a quality blue chip like Wesfarmers. But, we are currently living through very historic times. A once-in-a-century type thing. Shares regularly fall but infection outbreaks like this don't happen very often, thankfully!
Wesfarmers is the operator of Bunnings, Officeworks, Kmart, Target and Catch.com.au. It's quite reliant on foot traffic, though thankfully it does have online ordering capabilities.
Today the government banned the gathering of over 100 people, though some places can continue to operate as normal such as schools. Retail hasn't been banned. However, I think it's easy to imagine that many people will be trying to avoid the shops where possible. Retail shops and employees are fairly likely to be heavily impacted.
Is the Wesfarmers share price a buy?
There could more pain to come. The government and plenty of medical professionals are expecting this to last months, so FY20 is not going to be an ordinary year for Wesfarmers. But from FY22 onwards we could see earnings return to normality.
With interest rates so low it should mean that shares look so much better than other assets when we're on the other side of this.
Wesfarmers will undoubtedly see lower sales and lower earnings in the coming months. But is the entire business worth 25% less, particularly after the internet rate cut?
It's now trading at 19x FY22's estimated earnings, which is how far ahead I think you need to look before we have a normal year again.
The company has a decent long-term future, but I think there are other shares out there that have fallen harder and have better growth prospects. Wesfarmers' trailing dividend may be attractive, but there's no guarantee it will be maintained if earnings fall heavily.
