The shutdown of Catch by parent company Wesfarmers (ASX:WES) was a good decision according to financial analysts at Jarden.
In a note to investors, Jarden analysts expect earnings per share at Wesfarmers to dip slightly over the year, which is expected to lift considerably in FY26.
However, they believe the Catch closure signals that the overarching company is increasingly less likely to pursue a centralised supply chain strategy near term to leverage its scale, “a course of action which we believe could be to the detriment to the group longer term in our view”, analysts wrote.
As well as Catch, Wesfarmers is the managing company of Kmart Group (Kmart and Target), Workwear Group, Bunnings and Officeworks, and has interests in areas such as chemicals and mining.
Earlier this week, the parent company confirmed it will close down the Catch marketplace in the last quarter of FY25. This is projected to create one-costs of around $50 million to $60 million, not including the operating losses that Catch will incur from trading the second half of FY25.
In the same token, Wesfarmers revealed plans to accelerate OneDigital growth, with increased investment in the development of retail media capabilities through the digital arm across the wider group.
In line with previous guidance, the operating loss for OneDigital (excluding Catch) is expected to be approximately $70 million for the 2025 financial year - which includes the above-mentioned investment costs.
Analysts predict that the losses projected for OneDigital in FY25 is “unlikely to moderate materially” in FY26, adding that the retail media push could be a $500 million or more EBIT business in the medium term.
Jarden analysts claim the implications are five-fold. EPS growth is projected to surge to 14.8 per cent in FY26. They also noted that Wesfarmers made no comment on its first-half result, which the analysts interpret to mean no issues with consensus. “We see modest risk to Kmart, with Officeworks⁄Bunnings tracking well.”
There is also the retail media strategy, adding to earnings upside.
Meanwhile, the risk of a material lift in supply chain capital expenditure “is looking less likely”, with analysts claiming Wesfarmers is increasingly less likely to implement a centralised fulfilment capability.
Analysts also highlighted that Catch is the first major Australian casualty of global marketplace growth, and they expect discussion around competition and customer acquisition costs - along with foreign exchange and freight - to see greater focus.
Data shared in the note to investors show that Temu, Amazon, Coles, Woolworths, Webjet and Kogan have the highest percentage share in paid search.
“We see WES as a great business, with management continuing to actively manage the portfolio (positively), as evidenced by the Coregas sale and Catch closure,” analysts wrote.
“The above said, we do question whether WES is leveraging its scale to best position it to materially expand its share of the profit pool medium term, as WMT in the US has done.
“We see opportunities across health (report) and supply chain (report) in particular, and while this would require significant CAPEX, the first-mover advantage and ROIC opportunity is material.
“With these opportunities looking less likely to be actioned in the near to medium term, we see growth as moderating beyond FY26E and maintain our Underweight rating.”