Woolworths share price: 1H 2022 results update and trading view

In the below article we summarize half year results from Woolworths and take a look at how the share price is reacting to the news.

Woolworths 1H 2022 (interim results)

Interim results from Woolworths have shown earnings to have dropped from the prior year’s comparative period, although the group is offering half-year dividend to investors. The decline in earnings was guided previously and is due to weak sales in the group’s Australian business due to hard lockdown restrictions over the reporting period.

Some of the salient features of the results are as follows:

• Turnover and concession sales down 2.1%

• Adjusted diluted headline earnings per share down 16.3%

• Net cash R258million

• Interim dividend of 80.5 cents per share

• Fashion, beauty and home adjusted operating profit +34%

• Food adjusted operating profit -8%

• David Jones adjusted operating profit -44.6%

• Country Road Group adjusted operating profit -48.9%

Comments on results:

The groups higher margin South African apparel business looks to have carried earnings, while food sales were disappointing. Amongst the disruptions to business over the reporting period were supply chain issues, the social unrest in July and power shortages in South Africa.

Zero tolerance pandemic policies in Australia have negatively impacted earnings from Australia, although these headwinds have started to abate and hopefully should equate to a recovery in the second half of the year.

The group’s balance sheet remains robust and the David Jones excess cash and dividend offering of around R1bn will further help the business reduce localized (South African) debt. Supply chain disruptions pose a future risk to the business, although a healthy Australian economy could support earnings moving forward.

Woolworths: technical analysis

The share price of Woolworths trades in a range bound environment between levels 4920 (support) and 5455 (resistance).

In the short term we have seen a bullish price reversal off the 4920 level supported by a move out of oversold territory on the stochastic oscillator. This presents a cautious range trading opportunity with 5455 the initial upside resistance target from the move. Traders who are long might consider using a close below 4920 as a stop loss indication for the trade.

In Summary

• Interim results have shown a sharp drop in earnings impacted by hard lockdowns in Australia

• South Africa’s apparel division has led group earnings

• Country Road earnings have weighed most on the group

• Food sales have disappointed partly in lieu of social unrest in South Africa

• The group has reinstated an interim dividend

• The outlook for the Australian business into the second half of the year has improved following an unlocking of the economy from pandemic restrictions

• We have seen a bullish reversal off range support for the share price of Woolworths