WOW - Woolworths Group

[nulla nulla]

Having gone exdiv at $26.40 woolworths closed the week on $26.10. I suspect that the reaction to the japanes crisis held the share price down before it went exdiv and now the market is starting to recover it is taking woolworths with it. Not sure how long it will last or how far it can go.

 

[nulla nulla]

Adele Ferguson writes an interesting article on the battle between Coles and Woolworths in todays (28/03/11) Business Day section of the Fairfax papers. Here is the link:

http://www.smh.com.au/business/proc...ermarket-giants-go-to-war-20110327-1cbva.html


The most poignant part being..

".....The brutal reality for Coles is it has an earnings before interest and tax (EBIT) to sales margin of 4.1 per cent, compared to more than 7 per cent for Woolworths. With Woolworths now responding to Coles' price attack on certain products, it is starting to get ugly. Woolworths can afford it; Coles, less so.
This may not be an issue for the current management of Coles, many of whom came from Britain on short-term bonus incentives and who won't be around for the longer term havoc they have wreaked on the dairy, eggs or other industries. Coles' supermarket boss Ian McLeod stands to reap a bonus of around $38 million if he hits target through to 2013."..

The highlight is my work but it will be interesting to see which company suffers the most on the bottom line come next reporting season when the price war has run for a while. It will also be interesting to see what happens when the contracts expire for the Coles executives imported from overseas. DYOR and remember the market is driven by sentiment and prices often move in manners completely unrelated to worth. Disclaimer: I hold wow

 

[nulla nulla]

The market must be starting to see the value in the Woolworths trolley of business, food, alcohol & fuel. Nice action on the price this week. I have posted a two year chart for comparison.

What i liked most is that the lows are getting higher and the highs higher as well. I expect wow to slowly push up to the $28.00+ mark, mind you there will be dips but I don't expect them to go below $26.00.

DYOR, I hold wow so I am probably biased and/or optimistic.

 

[nulla nulla]

"Retailer up for the challenge" - Article in the Weekend Business section of the Sydney Morning Herald by Greg Hoffman from "The Itelligent Investor".

http://www.smh.com.au/business/retailer-up-for-the-challenge-20110401-1crji.html

No mention as to whether he holds Woolworths shares or what price target he puts on Woolworths but a fairly balanced article none the less, supporting the article by Adele Ferguson earlier in the week.

 

[ROE]

"Retailer up for the challenge" - Article in the Weekend Business section of the Sydney Morning Herald by Greg Hoffman from "The Itelligent Investor".

http://www.smh.com.au/business/retailer-up-for-the-challenge-20110401-1crji.html

No mention as to whether he holds Woolworths shares or what price target he puts on Woolworths but a fairly balanced article none the less, supporting the article by Adele Ferguson earlier in the week.

That is what margin of safety are for

you buy at a discount to its intrinsic value and with that you some what covered on the down side

You drive 5 tons truck over 10 tons load bridge just in case a naughty package loader put on an extra ton or two and you still make it over safely

 

[nulla nulla]

That is what margin of safety are for

you buy at a discount to its intrinsic value and with that you some what covered on the down side

You drive 5 tons truck over 10 tons load bridge just in case a naughty package loader put on an extra ton or two and you still make it over safely

I always drove across the bridge with 12 tons load on the basis that the sign had a built in safety margin. That is the bridge is really rated to 15 tons but they don't wont truckies driving across with 18 tonnes so the sign post it as a 10 ton load bearing bridge.

Not sure on the connection to Woolworths or my earlier post though?

 

[tothemax6]

I always drove across the bridge with 12 tons load on the basis that the sign had a built in safety margin. That is the bridge is really rated to 15 tons but they don't wont truckies driving across with 18 tonnes so the sign post it as a 10 ton load bearing bridge.

Not sure on the connection to Woolworths or my earlier post though?

In fact they use factors of safety, where they mark the maximum load to a fraction of the actually failure load. The bridge could probably take 120 tons for all one knows.

Question to WOW people, if commodity prices continue to rise, am I to assume that this will not actually hurt WOW margins, given that food is not really something people will cut down on?

 

[nulla nulla]

In fact they use factors of safety, where they mark the maximum load to a fraction of the actually failure load. The bridge could probably take 120 tons for all one knows.

Question to WOW people, if commodity prices continue to rise, am I to assume that this will not actually hurt WOW margins, given that food is not really something people will cut down on?

I gues the proof of the pudding is in the continuing increase in the profitiblilty of Woolworths year in and year out. During and since the global financial crisis peaked, Woolworths has continued to increase its' profits at a time other companies have not.

Food Alcohol and Fuel. You can tighten the belt on unnecessary spending but everyone has to eat: In tough times you eat out less and eat more at home; In tough times you buy your grog take away (the most price competitive bottle shop you can find like Dan Murphies or First Choice where they compete head to head) rather than at the pub; and in tough times you buy your fuel at the petrol station on the cheap price day using the discount voucher you got from Woolworths or Coles.

Commodity prices (particularly Oil) have been rising for years and Woolworths continues to improve profitability.

 

[boofhead]

Question to WOW people, if commodity prices continue to rise, am I to assume that this will not actually hurt WOW margins, given that food is not really something people will cut down on?

In the last few months WOW have released a statement about expected food price inflation is going to be less than expected and that will hurt the bottom line. Coles may negate some postive profit impact rising prices have.

 

[JTLP]

Michael Luscombe out - a former shelf packer in.

I think it was widely known Luscombe would be stepping down - how do holders feel about it coming to fruition?

 

[Julia]

Michael Luscombe out - a former shelf packer in.

I think it was widely known Luscombe would be stepping down - how do holders feel about it coming to fruition?

I don't hold WOW at present but am always impressed by their succession planning.

As you say, Mr Luscombe's departure has been well forecast, so has been imo built into the SP. I can't see any particular logic in the SP falling slightly today while WES rose.
In a week it will be meaningless.

WOW has an excellent history of choosing the right CEO's.

Just my opinion, but I think when this current price war on milk, bread etc, has all died down (and it will), Coles will not have won any long term converts, given the Australian public's desire to see farmers get a fair go.
If there's a backlash against Coles, it's no more than they deserve.

 

[9096848]

u r right, but it looks like wow is going to lose the discounting war with coles

 

[nulla nulla]

I don't hold WOW at present but am always impressed by their succession planning.

I hold at the moment so I might be looking at wow from the hip pocket perspective.

As you say, Mr Luscombe's departure has been well forecast, so has been imo built into the SP. I can't see any particular logic in the SP falling slightly today while WES rose.

I thought the initial rise (as it happened) may have been due to the succession uncertainty being finalised. However my concern that the incumberant managing director would be hanging arround until October as a toothless tiger seemed to be reflected in the subsequent fall.

In a week it will be meaningless.

I agree

WOW has an excellent history of choosing the right CEO's.

Seems right however in this instance I think James Strong has fumbled the manner of passing the baton.

Just my opinion, but I think when this current price war on milk, bread etc, has all died down (and it will), Coles will not have won any long term converts, given the Australian public's desire to see farmers get a fair go.
If there's a backlash against Coles, it's no more than they deserve.

I agree, as per previous articles, woolworths has the capacity to withstand competition.

u r right, but it looks like wow is going to lose the discounting war with coles

I think not. Woolworths has deeper pockets and can outlast Coles in a spending stand off.

 

[nulla nulla]

Woolworths has done well to hold $27.00 in todays close after what could only be called a difficult week.
The Chairman decided to announce that the Managing Director's contract would not be renewed at the end of September 2011. Further his replacement would not be the 2IC but the 3IC.
In one fell sweep Woolworths will lose not one but two experienced personel that have helped steer Woolworths through the GFC, competition from Coles and heaps of negative press.
Personally I think it is time that the Instutional Investors reviewed the performance of the chairman. Maybe Mr Strong would be stronger somewhere else.

 

[nulla nulla]

After dipping to $26.45 woolworths closed the week on $26.53.

It would appear that the market isn't impressed with the transition of management leadership. An article in the fairfax papers late in the week pointed out the chalanges ahead for the new md and the share price turned south.

Seems woolworths have been linked to a potential purchase of further hotels to increase their pocker machine income. A move some analysts see as being a poor decision in light of the crack down on problem gambling and the need of the Gillard government to keep Wilkie happy. Maybe later when the dust settles or there is a change of government?

However, for now Woolworths still has significant market share in Food, Petrol, Alcohol and Gambling. Still sounds like they have the main bases covered (I don't smoke ).

 

[The_Snowman]

Thanks for bringing to attention

 

[nulla nulla]

Analists were expecting growth of 3.5% so 3.2% was "a little short of their expectations". However Woolworths remains on target to achieve the amended forecast of profit growth between 5% - 8%.

Seems the market liked the report. Of course tomorrow the analysts will have had time to work the figures over and sprook their messages...gloom & doom...or sunshine and lollipops. I can hardly wait.

 

[nulla nulla]

Looks like the analists sprooked a message of gloom and doom and "The Snowmans" short is in the money. Today Wesfarmers release their Coles report.

Might watch for another re-entry point.

 

[nulla nulla]

A couple of interesting articles in todays Fairfax Business section:

http://www.smh.com.au/business/cole...lies-but-target-kmart-lag-20110420-1dov5.html

Some contradictions though..

"THE Coles-generated price war continues to win sales for the supermarket chain against arch rival Woolworths but the downturn in consumer spending is hurting its mini-department stores, Target and Kmart, their owner, Wesfarmers, disclosed yesterday."

....and then in the next paragraph....

"Their respective figures also suggested the big two were winning market share from smaller competitors."

And there in lies the reality of their market dominance. In the present financial crisis where consumers are extracting more value for their spending they are buying from coles and/or woolworths at the expence of the smaller retailers, particularly for Food, Alcohol and Fuel.

Both are growing, neither is taking market share off the other.

http://news.smh.com.au/breaking-new...lworths-cellarmasters-bid-20110421-1dpjj.html

Woolworths continues to consolidate and grow.

http://www.smh.com.au/business/coles-all-smiles-in-some-aisles-20110420-1doxd.html

Woolworths bounced today and I would not be surprised to see it go further ahead next week.

 

[oxygen]

Was interested to hear on YMYC on Thursday one of the guys from Team Invest recommended WOW as one of 2 stocks to buy for the longterm (other was QBE). He said EPS is growing while we have price deflation which bodes very well for the return or price inflation on food.