Wesfarmers has decided against spinning off its Officeworks stores via an initial public offering due to the market's current dim view of retail stocks.
The owner of Coles supermarkets and the Bunnings hardware chain began a strategic review into the office supplies business in February, but said on Wednesday that an IPO was no longer being considered.
"In light of current equity market conditions, Wesfarmers has determined that an IPO of Officeworks at this point in time would not realise appropriate value and would not be in the best interests of its shareholders," Wesfarmers said in a statement to the Australian Securities Exchange.
Retail stocks have been under pressure in recent months, weighed down by concerns over soft consumer spending and the possible impact of Amazon's impending arrival in Australia.
Wesfarmers managing director Richard Goyder said the group was happy to retain Officeworks and would only divest if the move was in the interests of shareholders.
CMC Markets chief market analyst Ric Spooner questioned whether the market had overestimated the risks from the rollout of Amazon's full retail service.
"Good strategic operators like Wesfarmers and JB Hi-Fi will have had plenty of time to ready their businesses by the time Amazon does get to fully ramp up its Australian operation, although some margin pressure looks inevitable," Mr Spooner said.
Officeworks has more than doubled its earnings since it was acquired by Wesfarmers in 2007, and has improved its return on capital from 5.7 per cent in the 2009 financial year to 13.9 per cent in the first half of 2016/17 .
Its first-half earnings rose 5.1 per cent to $62 million for the six months to December 31.
At 1125 AEST, Wesfarmers shares were 44 cents, or 1.0 per cent, lower at $43.49.
They were earlier as low as $43.27.
