The Wesfarmers Ltd (ASX: WES) share price is outperforming the S&P/ASX 200 Index (ASX: XJO) today. The retail giant's shares are currently trading 1.15% higher at $77.05, while the index is up 0.7%.
Wesfarmers is one of Australia's largest retailers, which owns several well-known businesses, including Bunnings, Kmart, Target, Officeworks and Priceline.
The market power of Bunnings has been a boon for Wesfarmers in the last few years, but now the main profit generator for the ASX retail share is facing some political pressure.
Parliament inquiry into Bunnings
According to reporting by the Australian Financial Review, bosses of a number of large retailers are going to be examined in a parliament inquiry, with Bunnings one of the companies under the spotlight.
This comes after the supermarket businesses of Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) faced political heat a few months ago.
The parliament inquiry will look at how retailers like Bunnings have treated customers and suppliers. The AFR reported that Nationals and Greens are pushing for better prices for both consumers and suppliers of large retailers like Bunnings.
It was reported that NSW Nationals senator Ross Cadell has accused Bunnings of "restrictive minimum ordering requirements" and marking up products between 50% and 100%. Another question Caddell wants to pursue is whether large retailers are buying land to limit competition.
Cadell was quoted as saying:
With no requirement to be bound by the code, customers are exposed to the risks of rising market power without competition.
The system in which our big-box retailers operate must prioritise value for consumers. Instead, it seems that as prices increase at the checkout, and margins shrink for the suppliers, only the big-box boys get richer.
He pinned part of the blame on Labor for being "too slow to reform the country's competition laws", and suggested Bunnings and other retailers were squeezing suppliers and customers. Of course, any stricter competition laws could be a drawback for Wesfarmers shares.
Bunnings initial response
The AFR reported that over the weekend, a spokesperson for Bunnings said the DIY hardware retailer would work constructively with this inquiry, "including to provide insight into our focus on delivering value to customers through lowest prices".
The spokesperson added:
We have deep connections with communities through our many local partnerships and initiatives, and our employment of more than 50,000 people across Australia.
Wesfarmers share price snapshot
The Wesfarmers share price has jumped more than 33% since the start of 2024. The company is scheduled to report its results on Thursday
Broker Goldman Sachs is forecasting that in FY24, Bunnings may have generated $18.84 billion of revenue, up from $18.5 billion in FY23. Total sales in FY24 could be $43.6 billion, up from $43.55 billion in FY23.
Meanwhile, Bunnings' earnings before interest and tax (EBIT) is projected to be virtually flat at $2.34 billion, while Wesfarmers' total EBIT is predicted to increase to $4 billion, up from $3.86 billion.
