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Last week Woolworths reported results that were disappointing but still better than the market was expecting. The result was the share price shooting up. Here are the numbers, Turnover is up 3.9%, HEPS are down 4.6%, and the dividend has been cut by 20%. The drop in the dividend is because management has decided not to pay a dividend out of their Australian business. It has been tough out there.
The shining light in their local operations continues to be their food sales, which saw a 9% increase in sales over the last six months. A pleasant surprise came from their local clothes sales, which were up 8% for the last six months. Having a look at the results, it looks like a tale of two halves. The first six months of their year were tough, but there has been a visible uptick in the second half of their year. Part of the turnaround in the clothing division is due to a repositioning of their product. The CEO Ian Moir said that they "forgot our core customers". Their range has now re-adjusted, and they see positive results.
To help get the Australian business back on track, Ian Moir is moving to Australia. A tail wind on the horizon for the business Down-Under will be the completion of renovations to their flagship Sydney store. The renovations started in 2017 and are expected to be completed in March 2020.
Don't expect fireworks from the Woolworths share price in the short-term. Having said that, the bad news of lower South African growth coupled with write-offs in the Australian business are reflected in the current share price. Once we see green shoots in the South African economy again and an improvement from their Australian operations, the share price should re-rate to a higher level.