Woolworths also showed some decent growth managing to increase sales by 9.4%. They grew their South African retail space by 7.6% and impressively grew their clothes division by 11.5%. I say impressively because this is a bit of a turnaround story plus the margins for clothing are much better than the food. Looking at the numbers we see that last year Woolworths made R1.57. Using the same method as we did with Shoprite we should expect earnings of around R1.72. The stock trades at R31.60 up 2.4% today and a PE of 18.3. The dividend cover last year was 1.5 so assuming that same ratio we should be expecting a dividend of R1.15 for the year giving the stock a yield of 3.7%. By looking at this year's interim dividend we could expect even more.
Now would I buy this stock considering the Wal-Mart entry? The simple answer is yes. Woolies offer something different to Shoprite. They operate in a niche market that people aspire to be involved in. They are growing their clothes division, they have the best margins of all the food retailers, they are focused on sustainable and environmentally friendly practices and market a healthy lifestyle. Therefore, because of these differences I don't think they would be affected too much and would be happy to add at these levels.