WOW - Woolworths Group

[Knobby22]

Dick Smith is a dying business though.
The whole electronics sector is going badly with internet sales. EVen JBHiFI, a very well run business will struggle to grow in my opinion.

 

[McLovin]

WOW...

Sold Dicksmith for some lose change of $20m.

DickSmith had HY sales of $873m and EBIT of $19.5m. So the equity was worth 0.5x full year EBIT

Not sure how the future upside works, or how much debt is within the Dicksmith unit. But it really isn't a large number, is it?!

FWIW, JBH trades at 5.5x, although direct comparison isn't fair due to the unknowns.

According to the AFR, Anchorage picks up the lease liabilities which are worth ~$50m.

 

[brettc4]

I imagine you have now received your Notive of AGM and the SCA Property Group proposal.

I am struggling to see the benefit here. The only thing that stands out is that the Board want's to reduce the companies Plant and equipment. Fine but I don't see how splitting off these propoerties will help them do that, as SCA Propoerty Group will want to maximise their profit as well.

What are others opinion on this proposal?
Can anyone educate me on why splitting out these propoerties is a good thing for WOW or me as a shareholder?

Cheers,
Brett

 

[Smurf1976]

The stat I've highlighted I think has more to do with the saturation of supermarkets. Realistically, how long can you build supermarkets for in a country that was already well served?

Ask yourself a question. If you are in an Australian city, any city, that you are not familiar with then would you need to actually ask someone for directions to a Coles or Woolworths store?

They have become much like petrol stations. Very rarely do you need to actively search for one, normally you see plenty just in normal travel. Worst case you could just drive around random streets and you'll almost certainly find either a Coles or a Woolworths reasonably quickly as there are so many of them.

 

[ecnalb]

WOW - Woolworths Ltd

There is some good results coming soon. Grant O'Brian has some please number, with supermarkets and liquor showing some great growth. 62c fully franked dividend coming up.

 

[tinhat]

Re: WOW - Woolworths Ltd

There is some good results coming soon. Grant O'Brian has some please number, with supermarkets and liquor showing some great growth. 62c fully franked dividend coming up.

For long term, stable dividend paying stocks, of course WOW is a great stock, but at the right price. We are on the verge of exuberance and already across it on so many defensive stocks. There will probably be better opportunities to buy into stocks like WOW.

I hold.

 

[McLovin]

Wow (pardon the pun)...

Anchorage, which bought Dick Smith from Woolworths for $20 million last September, appointed Goldman Sachs and Macquarie last month to explore sale options, including an IPO valuing the chain at between $550 million – $620 million. Feedback from fund managers has been positive, with the recent rollout of Dick Smith departments in 29 David Jones stores further pushing the name into the spotlight. Dick Smith earned $80 million before interest, tax, depreciation and amortisation in the 12 months ending June, compared with $36 million EBITDA in its last year under Woolworths. The company has previously outlined to fund managers that it plans to open 77 stores over three years, expanding the network to 400 stores.

So either WOW didn't know how to run this thing or Anchorage have played a masterstroke.

 

[ROE]

Wow (pardon the pun)...



So either WOW didn't know how to run this thing or Anchorage have played a masterstroke.

Agreement structure wow will get a fare share of the float ...they sold at that price to attract turn around specialist and participate on the up side ...no Wow isn't that stupid -

 

[skc]

Wow (pardon the pun)...

So either WOW didn't know how to run this thing or Anchorage have played a masterstroke.

Or Anchorage has done a great job dressing things up. It's only been 12 months so it's hard confidently believe such turnaround as sustainable. May be there were one-off savings to be had, large reduction in cap ex, may be lower inventory / working capital... the usual bag of tricks in any private equity turnaround game.

I can feel a MYR all over again.

The alliance with David Jones is not going to deliver much imo. Their respective market positions are quite different - DJS supposed to be more premium (are they anymore?) and in DickSmith they stock lower end brands. I don't think you can even buy a Sony TV at DickSmith. And who goes to David Jones to buy electronics? Only boyfriends/husbands who left their wives shopping in the clothes section. So you might pick up a few impulse buys on small ticket items, but much of the floor space are wasted with TVs and laptops that simply won't sell well imo.

 

[McLovin]

Agreement structure wow will get a fare share of the float ...they sold at that price to attract turn around specialist and participate on the up side ...no Wow isn't that stupid -

The profit share agreement was terminated earlier this year. I think they paid ~$70m to WOW.

Or Anchorage has done a great job dressing things up. It's only been 12 months so it's hard confidently believe such turnaround as sustainable. May be there were one-off savings to be had, large reduction in cap ex, may be lower inventory / working capital... the usual bag of tricks in any private equity turnaround game.

I can feel a MYR all over again.

The alliance with David Jones is not going to deliver much imo. Their respective market positions are quite different - DJS supposed to be more premium (are they anymore?) and in DickSmith they stock lower end brands. I don't think you can even buy a Sony TV at DickSmith. And who goes to David Jones to buy electronics? Only boyfriends/husbands who left their wives shopping in the clothes section. So you might pick up a few impulse buys on small ticket items, but much of the floor space are wasted with TVs and laptops that simply won't sell well imo.

Yeah, I certainly wouldn't be buying it. I'm more surprised that WOW couldn't have done these fairly simple things itself and then spun it off.

 

[Tyler Durden]

Going by the few DSE around my place and work (CBD), and if I dare to extrapolate it to apply to all stores, I can't see how those numbers could be supported.

 

[ROE]

If that is the case 90m for Dickies isn't a bad price

This is a dress up to sell, any one smart wouldn't be touching it

they are flocking a dead horse ...this area is intensely competitive and price sensitive, unless you are the lowest cost of doing business and selling the cheapest it hard to see you sustain decent profit....

 

[notting]

And you can get most things for a quarter of the price online.

 

[McCoy Pauley]

Woolworths still looking at ways to get into the pharmacy game.

http://www.businessspectator.com.au/news/2013/10/24/retail/woolworths-eyes-pharmacy-tilt

 

[piggybank]

Australia's two biggest supermarket chains Woolworths and Coles continue to punch above their weight, cementing their place among the world's top 20 retailers. Woolworths jumped two spots to 15th place while Coles' parent company Wesfarmers fell one place to 19th in a global ranking of the 250 biggest retailers by revenue. This year's Deloitte Global Powers of retailing report found Australian consumers were fairly upbeat in the face of a difficult start overseas in the last fiscal year. "Our home grown retailers Woolworths and Wesfarmers continue to maintain their impressive position in the top 20 global retailing powers" Deloitte Australia Partner David White said. Overseas retailers were still eager to target Australia to exploit relatively strong consumer spending, he said. "The relative strength of the Australian economy has persisted" Mr White said.

Woolworths, Australia's largest supermarket chain, beat global online retailer Amazon in terms of revenue, while Wesfarmers was ranked ahead of US supermarket giant Safeway, Deloitte said. The report again ranked US behemoth Wal-Mart as the largest retailer in the world followed by UK supermarket operator Tesco and US wholesale group Costco which now has operations in Australia. Tesco nudged out fourth-placed French supermarket chain Carrefour for second place. All of the other companies in the top 20 come from highly populated countries with large consumer bases such as the United States, Germany, UK, Japan and France. The report found more than half of domestic retailers predict consumer confidence will increase in 2014. Mr White said global firms Next and River Island who have been selling to Australia through their online stores were rumoured to open physical outlets after global fashion giants Uniqlo and H&M decided to open stores in Melbourne. Deloitte found the fastest growing company was Dutch supermarket chain Jumbo Groep which recorded a 115 per cent jump in revenue growth. Meanwhile, Amazon doubled its revenue growth to cement itself as the largest online company, followed by Apple and Wal-Mart.

Eighty per cent of the top 250 retailers posted an increase in retail with a total revenue of $4.3 trillion in 2012.

 

[skc]

Australia's two biggest supermarket chains Woolworths and Coles continue to punch above their weight, cementing their place among the world's top 20 retailers.

Assuming you didn't write this article, piggybank, could you please provide the source? Thanks!

 

[McCoy Pauley]

Solid sales figures for the core, meat & potatoes business for WOW released a week or so back. Seems to set it up nicely for the first half results soon. Still, it seems to me that Masters is a major drag on WOW, and I wonder how long it will be before O'Brien decides that Masters is a headache he can do without and tries to find a way to sell it just to get rid of it.

 

[matty77]

Masters are losing cash every day with WOW propping them up, they are saying Masters wont even begin to turn a profit for another 3 years or around 2017. As we know those sort of forecasts can be misleading, so it wouldn't surprise me if its longer. Can WOW afford to lose another 300 million + over the next 3 years (or more!) on Masters or do they think of a different strategy? (yes they can afford it but will they let it happen?)

I'm not a fan of the Masters strategy either with placement of stores, if anyone has noticed most of the new stores have a Bunnings directly opposite or 100m down the road, it just doesn't make business sense to open a "poor mans Bunnings" next to all the Bunnings stores! If Bunnings was a bad performer then yeah good idea, but its a very solid performer..

My guess is they will throw cash away for another 2 years, then stop building new stores...

 

[McCoy Pauley]

Masters are losing cash every day with WOW propping them up, they are saying Masters wont even begin to turn a profit for another 3 years or around 2017. As we know those sort of forecasts can be misleading, so it wouldn't surprise me if its longer. Can WOW afford to lose another 300 million + over the next 3 years (or more!) on Masters or do they think of a different strategy? (yes they can afford it but will they let it happen?)

I'm not a fan of the Masters strategy either with placement of stores, if anyone has noticed most of the new stores have a Bunnings directly opposite or 100m down the road, it just doesn't make business sense to open a "poor mans Bunnings" next to all the Bunnings stores! If Bunnings was a bad performer then yeah good idea, but its a very solid performer..

My guess is they will throw cash away for another 2 years, then stop building new stores...

My understanding, from people connected with both sides of the fence, is that Wesfarmers deployed a very deliberate strategy of controlling property so that Woolworths would struggle to build a Masters that was not near a Bunnings Warehouse, unless it was effectively in an area that Wesfarmers considered to be not profitable for them.

Having said that, I know that in Preston (northern Melbourne) Woolworths did build a Masters that is just down the road from a well-established, and popular Bunnings. I admit that although I'm a WOW holder, I do buy hardware, etc, from Bunnings as it's difficult to break my habit.

I did read a comment somewhere the other day on one of the online rags that suggested that Luscombe decided to execute the joint venture with Lowes to build Masters because his local hardware store didn't contain everything he needed for a DIY project. I suspect the story is apocryphal, but I sometimes do wonder...

 

[notting]

I prefer them Masters to Bunnings and think they are great!
The idea isn't to make a lot of money but to seriously harm the Bunnings model which can be used to help pay off the Coles dept and so on.
Bunnings has been pretty much a monopoly ever since it took over Hardware House which was terrible for the consumer.
Masters is air conditioned and the staff are far more helpful, although Bunnings has lifted it's game in customer service since Masters came along.
As far as I can see Masters is getting more popular too.