WOW - Woolworths Group

Wesfarmers hit an interday high of $46.95 on 23 February 2015. They went exdiv on 24 February and have fallen by much more than the div. I suspect you may be right JCPL, in you suspicion that the market is factoring in slow growth although I thought that this would have been factored in.

I felt that the Woolworths Report was presented in a very downbeat negative manner. The comparison of Dec 2014 with Dec 2013 figures highlighted the slow growth and drop in profit. However reading through the financials it appears that the second half of the year was stronger than the first half, suggesting their cost cutting efforts and management controls are starting to take effect.

The market already knows that Masters will be a weight around Woolworths neck for some time to come, so this should already be factored into the price. It would appear that negative aspects in the economy, drop in real wages, increasing unemployment and a fall in consumer discretionary spending are painting a gloomy picture for the future of Wesfarmers and Woolworths and today the markets decided it was time to get out?

nulla nulla said:

Woolworths closed down $3.24 at $30.71. Wesfarmers finished down $1.59 also. Might be something more than just the negative report for Woolworths.?

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The rest of the retailers are bottomed and breaking up.
TRS, HVN, SUL, JBH, MYR, PMV to name a few all kicking along.
It is a wild over reaction I dunno, never give up your one arm bandits I spose.
PS someone went sick on MTS at the close of play today!

I think one of the bigger issues facing WOW and to a lesser extent Coles is the "fight to the bottom" on margins instigated by Aldi. In today's announcement, WOW mentioned that they need to invest more heavily in price (read match the competition and reduce prices) to maintain market share. A number of analysts called the increase in margins for the half year as "low quality" and "unsustainable" which again points to further margin erosion in the future. I think there is a big concern that the Australian grocery sector will follow the way of Europe and see margins drop significantly due to competition and general deflation - this, in my view, is impacting both WOW and WES.

Secondly, the weakness in Big W must have see through implications for Target and Kmart in my view. Again why WES has followed WOW in underperforming today.

coolcup said:

I think one of the bigger issues facing WOW and to a lesser extent Coles is the "fight to the bottom" on margins instigated by Aldi. In today's announcement, WOW mentioned that they need to invest more heavily in price (read match the competition and reduce prices) to maintain market share. A number of analysts called the increase in margins for the half year as "low quality" and "unsustainable" which again points to further margin erosion in the future. I think there is a big concern that the Australian grocery sector will follow the way of Europe and see margins drop significantly due to competition and general deflation - this, in my view, is impacting both WOW and WES.
Secondly, the weakness in Big W must have see through implications for Target and Kmart in my view. Again why WES has followed WOW in underperforming today.

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Thought Fundies would be all over this.

How about MASTERS
Oil price
Drop in Australian Dollar

I'm a techie!!

coolcup said:

A number of analysts called the increase in margins for the half year as "low quality" and "unsustainable" which again points to further margin erosion in the future.

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Analysts are useless turds, who have never run and could never run a business or do anything but write crap and make the worst suggestions for performance you can imagine. Their like film critics or music critics who do nothing but sh&t and eat and spew garbage.

Their 'analysts' it's another word for useless loser who can't do anything but analyze which isn't anything of the sort and is usually just speculation that rhymes with the status qua and what went before. If they could actually do anything they would be employed to actually do it.
I'll guarantee they were all positive on WOW prior to today. Waist of space.

notting said:

Analysts are useless turds, who have never run and could never run a business or do anything but write crap and make the worst suggestions for performance you can imagine. Their like film critics or music critics who do nothing but sh&t and eat and spew garbage.

Their 'analysts' it's another word for useless loser who can't do anything but analyze which isn't anything of the sort and is usually just speculation that rhymes with the status qua and what went before. If they could actually do anything they would be employed to actually do it.
I'll guarantee they were all positive on WOW prior to today. Waist of space.

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Is that you Grant O'Brien?

Triathlete said:

I would be keeping an eye on it for any type of reversal in price.

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Well we certainly got the reversal today

Triathlete said:

Well we certainly got the reversal today

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yeap zoom past my SL; WES was better and was sold after a profit on price and some dividends to help as well;
was heavier in WES than WOW so this limited the pain
probably not that bad a deal now, will not rush to sell at that price but will not stay long for long

nulla nulla said:

painting a gloomy picture for the future of Wesfarmers and Woolworths and today the markets decided it was time to get out?

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If you were an Elliott technician, you would not make those kind of speculation, especially for WES. There is no such thing as a gloomy picture at all time high for WES, but it is right when gloomy picture is painted after the market has a significant fall (WOW), because falling prices make people feel pessimistic. WES was trading in a sideways correction since mid 2013, and not rising prices created the same effect as a crash for WOW-at the bottom of Intermediate Wave (2) there appears to be "gloomy". It is normal market behaviour on the onset of the major advance.


WES just resumed it's uptrend and basically this is the last time to buy it for less than $46 in wave ((ii)). A gloomy outlook in a rising market is extremely bullish, it is basically the main fuel for wave ((iii)) to start after everyone who believes in fundamentals was kicked out of the stock because third waves can't rise with everybody on board, they are waves that "run on empty" and by surprise.

For the textbook correction it would look best if WES wave ((ii)) could retrace 61,8%( to $42,8), and this could take up to few months. But it can take another steeper shot in less time. As long as it is trading above trendline resistance from 2009 low, it is bullish. Market proved that it takes this resistance seriously.
Socionomicaly, second wave after the major bottom carry even more gloomier picture that at the bottom itself, so don't be surprised if some really bad news come along for WES while wave ((ii)) is in progress. In fact, they could mark the higher bottom.



Unfortunately for fundamentalists the gloomy picture turns into rosy only when the entire Intermediate Wave (3) is finished at sub $100 levels in the years to come. Then they can point a finger to good results, positive recommendations and optimistic outlook. But it will be too late and rosy picture won't help to make any money, because bullish convictions will be already crystalized, resulting in a price reversal.






WOW is approaching a major bottom and as expected is progressing in wave (C). C waves have a character of steep decline and fundamentals usually collapse here. It should take a form of "five" and ideally will end close to the previous bottom of ~$29, were opportunity for buyers will be presented again.

I don't read any reports or results, because they don't have any value in forecasting future price direction, they are just the reflection of previous price movement and WOW is in a crash almost a year, so the context of any report is obvious...

rimtas said:

I don't read any reports or results, because they don't have any value in forecasting future price direction, they are just the reflection of previous price movement and WOW is in a crash almost a year, so the context of any report is obvious...

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WOW .... I will contact my astrologer and see what she has to say

tech/a said:

Sorry about the delay been pretty busy.

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This is a WEEKLY CHART

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You are suggesting that Woolworths will test $28.00 and possibly $24.00ish? Were you tempted to trade the price movement between 3 December 2014 and 27 February 2015?

tech/a said:

Why on earth would a Fundamental follower see WOW as juicy.
If fundamentals looks at Value and doesn't follow the herd then
negative AND positive announcements are ignored?
OR
Is it just the negative ones.

Surely the total landscape of the Company is affected by earnings?
Its happened NOW.
So what buy up!!





This is not the herd----Is it?



So what is your view now?

My view is not a lot different to DEC 3rd.

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My view is there is a good likelihood of a dead cat bounce (a possible trade opportunity) but it may not start until Tuesday/Wednesday allowing the market to dip further as the herd soaks up the negative media over the weekend and get their sells processed when the market re-opens next week. I suspect the bounce will be short lived and then the market could drift down to the recent low $29.00 ish where Technical traders will look for a double bottom. If it holds then there should be a sideways and upwards pattern re-emerge with the share price ranging between $29.00 and $33.00-$34.00.

If it doesn't hold $29.00ish then it is possible for the share price to test $26.00 at which point it will receive substantial long term investment support.

It appears that the biggest factor for the drop of WOW and WES yesterday was not the slowing growth, reduced profitability or Masters but the fact that Woolworths have signaled that they are going to take Coles head on in a price war. The market sees both companies as suffering from this (Qantas/Virgin etc).

As always, I use a crystal ball, windex and a soft cloth to forecast future price movements, so I may be totally wrong.

No not tempted.
I trade futures.
But if I had an SMSF that was trading top 200 it may have come up
As a trade in that period.

Took a look at the figures over the weekend.

By my calculations, full year EPS went backwards in the year ending 4 January 2015 compared to the year ending 30 June 2014 or, at best, was flat.

For a behemoth selling consumer staples in what is effectively a duopoly (even if one includes Aldi, Costco and Metcash, it's still an oligopoly), that is not a good sign.

I do wonder how sad Grant O'Brien is to see Jegen disappear back to Europe. To replace him, WOW has promoted the executive responsible for the outperformance of the Dan Murphy and BWS retail network to run food and liquor.

There's also been a shift in how WOW promotes its supermarket offerings, if one looks at the catalogues stuffed in the postbox. A much bigger emphasis on lower costs, etc than there used to be.

On the weekend just finished, I was speaking to someone who used to work at a supplier to WOW a little while ago. He reckons that WOW is the worst culprit at screwing over their suppliers - much worse than Coles, whom you could reason with. WOW were just ruthless.

I had a nibble at 29.50 today.

fanger said:

I had a nibble at 29.50 today.

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Why?

McCoy Pauley said:

Took a look at the figures over the weekend.

By my calculations, full year EPS went backwards in the year ending 4 January 2015 compared to the year ending 30 June 2014 or, at best, was flat.

For a behemoth selling consumer staples in what is effectively a duopoly (even if one includes Aldi, Costco and Metcash, it's still an oligopoly), that is not a good sign.

I do wonder how sad Grant O'Brien is to see Jegen disappear back to Europe. To replace him, WOW has promoted the executive responsible for the outperformance of the Dan Murphy and BWS retail network to run food and liquor.

There's also been a shift in how WOW promotes its supermarket offerings, if one looks at the catalogues stuffed in the postbox. A much bigger emphasis on lower costs, etc than there used to be.

On the weekend just finished, I was speaking to someone who used to work at a supplier to WOW a little while ago. He reckons that WOW is the worst culprit at screwing over their suppliers - much worse than Coles, whom you could reason with. WOW were just ruthless.

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The numbers don't look that bad to me, The grocery and liquor performance was good.

the only drag on performance was the home improvement division and the inventory write down at Big W.

The write Down of Inventory relates to a stock clearance they are planning as they adjust their customer offering, this is likely a one off, outside of this the division made a profit, and when you take that out of the equation for the group the profits grew.

the home improvement division is running at a loss, due to some stock clearance as they feel there way.

All up I am happy with the result, and the out look. I have it valued at around $34.69 fair value.

I wrote a September put for 3000 shares at $31.19, if that finishes in the money I will happily take the stock.

rimtas said:

WOW is approaching a major bottom and as expected is progressing in wave (C). C waves have a character of steep decline and fundamentals usually collapse here. It should take a form of "five" and ideally will end close to the previous bottom of ~$29, were opportunity for buyers will be presented again.



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Hi Rimtas

I am feeling more bearish on WOW at the moment and if the previous $29.11 is broken ( today price $29.29) then I feel that an initial target price of between $27.82 and $26.90 which is (261.8 % wave B) by my calculation is likely.

My previous charts showed $31 , $29 and $26 as the strongest levels of support but not feeling at all confident with WOW at the moment.

Cannot see anything positive from the technical to start buying yet. Just sitting on the sidelines should be an interesting few weeks.....

your thoughts!

This is really worth consideration. When the Woolworths 1st quarter results came out at the end of October 2014 the market savaged the share price pushing the value down from the close of 31 October 2015 of $36.00 to a low of $33.11 on 4 November 2014, then it bounced back to the $34.63 open on 11 November 2014 from which point it fell. The subsequent negative analysis/analyst sell recommendations saw the share price drift/pushed down to an inter-day low of $29.11 on 17 December 2014, before it started to climb back.

The latest (first half) report saw the share price savaged from an inter-day high of $34.71 on 25 February 2015 to an inter-day low of $29.18, today 2 March 2015. This drop of $5.53 took only two (2) days from the release of the report where three months ago the drop from $36.00 to $29.11 ($6.89) took near enough six (6) weeks.

I suspect Woolworths has more to fall in the coming days/weeks as the analysts get their reports out and their clients re-act. Be wary of any dead-cat bounces.

Hi Thriatlete,

I am scared, too. Almost to death. This freakin crash shaked out all bullishness from me, and to be exact from my limbic system. It just tries to prevent me from triggering a BUY button. But what changed exactly? Nothing. Week ago I expected this crash, I expected it to be five and I expected it to be steep. https://www.aussiestockforums.com/forums/showthread.php?t=3539&p=861825&viewfull=1#post861825





And amazingly, things are falling in line. At this point in time I see many signals that are pointing to a probable reversal soon. The most important I think is this long term trendline, which market proved is a valuable resistance.
If it fails considerably, lets say drops below 28 and stays for at least a day here, I am out and will not return to this stock again for at least this year. ( In this case I don't see bottom neither at 26, nor at 24, and most likely below 20 in the years to come. But this extreme bearishness is the result of most recent drop )

Back to bullish signal-the trendline runs through about 28,5 next few days. The previous Dec 2014 bottom is not important, as the resulting wave (B) was "three". So it can drop below and do not result in sell signal, on contrary, most likely it will be a BUY.




The trendline in the above chart also produces a Fibonacci relationship between these major waves where Wave (C) would be in a Golden Ratio with Wave (A). This will occur if WOW drops to 28,65, and will have complete subdivisions






Looking at the anatomy of Wave (C), it looks like small 4th wave should develop soon, and then a small drop to mid 28 levels, resulting in one more recognizable pattern-when wave 3 is extended, waves 1 and 5 are equal in length.







One more market manifestation in waves formation are Fractals. I know that majority of people hear this first time, but in the years of my experience I've found them very reliable patterns, they usually are forming at the points of reversal, copying smaller 4th or B waves, and if EW subdivisions are clear(like this time), I consider this very high probability. Fractals do not say about the degree of the reversal-dead cat bounce or new bull wave, they just point that reversal is due. All it needs is a breaking point, a few daily candles Up.






It is very exiting that so many signals appeared out of the blue(there were none a week ago) and all of them are falling to one point in time and price(mid 28,5 this week).
Price action falls to trendline in five waves, having Fibonacci Ratio and producing a Fractal.

I see it as an opportunity to BUY. But because I am scared, like the rest of the crowd, I will catch a knife with 400 shares at the levels I discussed above, and another 600 if small "five" develops in 15 min time frame after those levels were reached. I do not remember any red realized positions in the last few years in my portfolio, hopefuly WOW will not break this trend. To realize a loss I must have a complete understanding that market proved I am wrong and crushed everything I see. If it happens, I'll run with loss. Aleluja.

tech/a said:

Why?

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Why not.