The conglomerate of Wesfarmers (ASX: WES) is shielded by cost advantage and the intangible brand power of its hardware store chain Bunnings. And it’s not just your weekend tinkerer visiting the vast network  of stores. Across  Australia and New Zealand,

Bunnings supplies project  builders, commercial tradespeople and the housing industry.    

It employs 43,000  people, with revenue of $12.5  billion, and a network  of 375 trading  locations, comprising 265 warehouses, 75 smaller format stores and 32 trade centres. It’s this scale  that allows it to generate significant  bargaining power with suppliers when sourcing products, negotiating rents with landlords, and other areas, says Morningstar analyst Johannes Faul. “The chain passes along a large portion of these savings and operating efficiencies to its customers. Bunnings’ strategy has  been to grow volumes over profit margins, broadening its range, investing in service and continuously cutting prices  to grab  market  share and build a loyal customer base.”

What’s more, the nature of hardware stores helps Bunnings fend off e-commerce rivals. The high weight/value ratio of many products makes shipping hardware expensive. And the specialised knowledge of Bunnings staff is hard to replicate, Faul says. Wesfarmers is a two-star stock  with a PE ratio of 8.06. It has  a forecast fully franked  dividend  yield of 4.55 per cent.

Price: A$39.14

Mkt Cap: A$44,401m

P.E Ratio: 8.06

Gross Dividend Yield: 4.55%