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Woolworths 6 month sales, disappoints

Woolworths released a trading update yesterday. The stock has been under exceptional pressure. Over a year it is down nearly 30 percent. Over five years the stock is up 65 percent. There is no doubt the stock price "got ahead" in the face of what was a deteriorating outlook. Harry Hindsight knows all of this, Harry can tell you almost anything that you want to know. That counts for nothing, if you own the stock, if you followed your rights a couple of years ago, it means very little.

What is important to know is that you hold a diversified business, both by product range and by geography (Aussie and here), and that the core consumer of Woolworths is in the higher LSM (Living Standard Measure) groups. That means little. Indebted consumers are amongst all groupings, and can all fall into the same trap. Finance should be taught at all levels of school, how to use leverage (i.e. when to use debt and when not to), and to start saving immediately.

Herewith the trading update: "Group sales for the first 26 weeks of the 2017 financial year increased by 6.7% compared to the prior year. Woolworths Clothing and General Merchandise sales increased by 3.5%. Price movement was 7.3%. Sales in comparable stores grew by 1.2% and retail space grew by a net 2.9%. Woolworths Food sales increased by 9.5%, with price movement of 9.2%. Sales in comparable stores grew by 5.6% and retail space grew by a net 7.9%."

That sounds average and it really is. It is as much a function of having done really well and now levelling off. And then the trading update, which everyone has been suitably anxious about for the last few weeks. The company is able to give a 6 months range that is minus 7.5 to minus 2.5 percent lower than the comparable period, that is on Headline Earnings per Share. Strangely the stock ended the day up over a percent, and today has started over half a percent better. Strangely if one hadn't been watching this for a while.

I like the Australian plans to roll out a premium food offering through David Jones, see - David Jones - Investor Roadshow. Heck, they may even sponsor a few seasons of Masterchef Australia! Rather them than Coles. According to the Wiki entry on Masterchef (the down under one), there has been demand at a supermarket (and restaurant, the premium category) level for more premium foods and ingredients.

What to do with the company holding? Nothing. The yield underpin is around 5 percent, the company is unlikely to drop the dividend, and whilst the next 6 to 18 months may be tough, I suspect that rates here are likely to be steady. They may even go lower. A well run business, more when they release their numbers on (and around) the 16th of February.


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