For what it is worth and without trolling for an argument, I see Woolworths from the following perspective.
Woolworths has assets but the net tangible asset backing per share is very low as most of their locations are leased. The leases are very favorable as shopping centres like having cornerstone tenants that bring large numbers of customers in.
Woolworths also works it’s suppliers:
In the fruit & veg industry they cut out the middle man and buy direct from the farmers. They have a reputation for pushing prices down and insisting that the quality of the product meets a high standard of quality and presentation.
In the meat sector they also buy product direct from the farmers and run the product through the abattoirs as a negotiated job lot (if they don’t already own the abattoirs).
In respect of Alcohol, they own Hotels and Wine Shops, Dan Murphy’s, BWS, Langtons and now Cellermaster (mail order & online) and Wine Market (on line). Once again they buy in bulk and push the prices down.
In respect of Groceries, they push supplier prices down, charge for shelf space, probably insist on and charge for regular promoted discounts and have charge back deals for items that move too slowly and/or discontinued lines.
In respect of fuel they own most of the previous caltex outlets and no doubt have stitched up a lucrative supply deal with Caltex.
The point is they the supply across Australia on an incredibly large scale on a competitive basis. The report just out shows that they were able to offset tightening consumer spending over the last year by cost cutting and still post an increase in profit by 6%.
As to competition, they have proven that they are able to meet head on and survive challenges from:
Coles;
Aldi;
Metcash/IGA;
Franklins; and
Davids (Cambells Cash & Carry) (Gone?)
Costco’s is coming, so what. Costco’s is already in Melbourne and the feedback is that the prices are no better than the big chains “specials”. And the advantage of buying from Woolworths/Coles versus Costco is you don’t have to buy in bulk on the day and have massive storage space at home to store your groceries.
My previous posts in respect of Woolworths are relative to the regular trading opportunities that arise in the period between reporting and going exdiv. Even if you were a passive investor rather than a swing trader, Woolworths is still a standout with the franked annual div and a price that is only slightly higher than the low it hit at the bottom of the GFC. The market is driven by sentiment and at the moment Woolworths is not the market darling. But the market is fickle and Woolworths will be seen as an attractive opportunity again, one day.
. For now, trade the swings and lock in your profits.
As always Do Your Own Research.