👉 Background: Wesfarmers is the WA-based retail behemoth behind some of the biggest-name brands in Australia. We're talking Bunnings, Kmart, Target, Officeworks, Priceline, Catch and many more. But not just in retail, Wesfarmers also owns companies in industrial, safety, energy and many other industries.

👉 What happened: Now, Wesfarmers has announced its sales for last financial year jumped by 1.5% to over $44 billion. Off the back of these sales, it delivered a tasty net profit of $2.6 billion. Wesfarmers CEO called Kmart the “standout” performer because its profit jumped 25% to nearly $1 billion. All aboard the Anko-train!

👉 What else: But Wesfarmers’ chemicals, energy and fertiliser division got hit hard, with earnings falling more than 34%. Luckily, its top performing brands could offset the performance of others. And that’s the benefit of having a diversified portfolio of businesses and brands.

What's the key learning?

💡Business diversification is a strategy that involves holding businesses or investments across different industry lines in order to reduce risk.

💡Wesfarmers is a textbook example of diversification. They've got businesses in every industry from department stores, hardware retail, office and stationery retail, and even chemicals and energy. Having this diverse portfolio helps Wesfarmers cushion the blow of a downturn in any single sector.

💡But there's also a flip side to this: over-diversification, which puts a company at risk of becoming a jack of all trades but master of none. General Electric, which used to be the largest company in the US, over-diversified its businesses and has since split up into three separate companies.