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Overall Group Performance:
Turnover increased by 5.7% (6.2% constant currency).
Sales growth softened in the final eight weeks.
Food business remained strong, with double-digit growth.
Apparel businesses (FBH and CRG) faced challenges.
Woolworths South Africa:
Strong Food sales growth driven by volume and innovation.
FBH sales growth moderated due to supply chain disruptions and systems changes.
Beauty business continued to perform well.
Online sales growth across Food and FBH.
Country Road Group:
Sales declined due to a challenging retail environment and ongoing restructuring.
Black Friday and festive season sales showed some improvement.
Financial Highlights:
Property disposal in Australia will boost EPS significantly.
Headline EPS and adjusted diluted HEPS are expected to be lower than the prior year.
Key Takeaways:
Woolworths continues to navigate a challenging retail landscape.
The Food business remains a key driver of growth.
Apparel businesses require significant improvement.
Restructuring efforts within CRG are ongoing.
The property sale will provide a significant boost to earnings.
Weaker Apparel Performance: The company's apparel businesses in both regions underperformed expectations.
Negative Operational Leverage: This underperformance led to negative operational leverage for the entire Group.
Lower Earnings: As a result, both Headline Earnings Per Share (HEPS) and Adjusted Diluted HEPS (adHEPS) are anticipated to be lower than the previous year's figures.
Expected Ranges:
HEPS is expected to be between 148.4 cents and 158.6 cents.
adHEPS is expected to be between 165.7 cents and 176.1 cents.
In essence: The company's overall profitability is expected to decline due to the poor performance of its apparel businesses.
Previous Post (Tuesday 21 January): Woolworths: Candle Structure Mixed, But This Pattern Sparks My (Early) Interest
Technical Pattern: Falling Wedge (Bullish/Positive)
Trend: Downward
Candle Structure: Mixed (attempting to stabilize in the short term).
Required: Improved candle structure (i.e. possibly an igniting bar that would alert traders to 'take note').
Previous Post (09 January): Woolworths: Price & Trend Analysis
Overview: When we look at the short-term price action over the last 7 days, we see a clear weakness. This is confirmed by the 14-day trend, which shows aggressive selling. Essentially, the price has been steadily declining over the past two weeks.
Medium Term Outlook: The medium-term picture is still bearish, but with a caveat. We're seeing persistent weakness, but there's a glimmer of hope. If the price can reclaim the prior session's lows, it could signal a potential bullish reversal. However, we need to monitor this closely on lower time frames to confirm any such move.
Long-Term Perspective: The long-term trend is also bearish. We need to wait for the price to stabilize on the lower time frames before we can reassess. Until then, the outlook remains cautious.
WHL is facing headwinds across all time frames. What should investors be watching for? Investors should keep a close eye on the price action on lower time frames. If we see a sustained break above the prior session's lows, it could signal a potential shift in the trend. However, until then, caution is warranted.
Lester Davids
Analyst: Unum Capital
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