Woolies trading update positive

Yesterday Woolworths came out with a strong trading update. I guess we are starting to get very used to strong updates from the likes of Woolworths and the other retailers. Nevertheless it's a good indicator that even off what is continuously becoming a higher base the growth is still strong. Group sales for the first 20 weeks of the 2013 financial year increased by 15.9%. Sales in comparable stores grew 9.9%.


What is interesting to see was the different growth rates between the 3 big divisions. Food sales grew by 11.2% on the back of a price increase of 7.3%. I did notice those pre-roast chickens going up in price. Clothing in SA grew by an impressive 13.7% with prices increasing 5.8% while general merchandise grew 11.5%. Sales in Australia and New Zealand grew 36.9% on the back of the witchery acquisition which took affect September this year.


I must say I do like the mix of Woolworth's products. Clothing is higher margin, a lot easier to transport and does not go off. The acquisition of Witchery seems like a good one to me. Not necessarily because they have access to the Australian market but more because I think they are going to bring those brands to South Africa in the same way they have done with Country Road. This is why the clothing sales growth in SA of 13.7% is very impressive. They have managed to turn their clothing division around in the last 5 years, Ian Moir who came from Country Road really playing to his strengths.


The debtors book grew by 10.9% with impairments for the period of 1.8%. That is a good sustainable rate which shows their consumers are not under too much financial pressure.


The stock has had a whopping year, up over 70%! On the back of their ambitious growth in the clothing division and maintaining those extremely high standards in the food department I feel Woolworths will continue to attract the aspirational consumer, steal market share and grow on the back of a stronger consumer. Still a buy for me.