Woolworths Holdings pre result

Woolworths is set to release results for the six months ending 25 December 2016 on Thursday the 16th of February.

Woolworths Holdings group has given fairly thorough guidance on what to expect (in terms of sales and earnings) through the release of a recent trading statement. 

Trading Statement guidance overview

Earnings per share for the period are expected to be a staggering 30% to 40% higher than the prior years comparative interim period, although this is largely/soley due to the disposal of a property in Sydney Australia. The adjusted headline earnings per share figure guides towards a much less impressive 0% to 5% decline over the period. 

A breakdown of the group’s sales by division show firm growth in its Food segment, marginal growth in clothing and merchandise and a contraction within the David Jones and Country Road divisions. The group has attributed the poor performance in the latter divisions mentioned above to the timing of “Boxing Day” which will only see the sales contributions thereof reflect in the second half of the 2017 financial year.  The termination of the Dick Smith electronics concession also weighed on the sales performance of the David Jones division.

The Financial Services debt book showed growth of 2.3% year on year, although the annualised impairment rate for the period increased from 4.8% to 5.9%.

Comments

The Food division remains the standout segment within the Woolworths group, providing a bit more of a defensive hedge in weak consumer environment than those retailers predominantly apparel focused would. Markets will be looking within the upcoming results to see the group’s progress and plans for the David Jones Food rollout in Australia, for which some of the recent property sales cash is being allocated for, as this is seen as a possible catalyst for future growth within the company.

A key deliverable investors will be looking at would be, the company’s progress towards driving synergies and efficiencies across the group particularly that between Woolworths SA (WSA), David Jones and Country Road, the latter of which saw cost of sales in FY16 more than double that of WSA.

Broker view

Woolwworths broker ratings

A Thompsons Reuters poll of fourteen surveyed analysts (see pic) arrives at a buy consensus for the stock. Analyst estimates for Woolworths currently give a 12 month share price target range of 6386c to 10933c, with a median of estimates arriving at an 8660c valuation for the stock.

Broker views are subject to change following results releases and as such we will look for any changes thereof post the release of the group’s interims on Wednesday for a follow up report. 

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.