Woolies releases a great trading update

Woolies released a -> Trading Update And Trading Statement this morning. And the stock has responded positively, but that is against the backdrop of a stock price that has been pummelled in recent days as the retail sector has taken pain. Byron covered that nicely yesterday in his piece on Shoprite. There are a lot of moving parts in there, because of acquisitions, the addition of Witchery and Mimco's saw New Zealand and Australian sales jump over 55 percent. But, the key part in seeing group sales increase 18 percent for the comparable 26 week period last year is that earnings have comfortably outpaced that. For the first time in my life I left a Woolies store during December because it was so busy that I just couldn't bear it. There was a queue of 15 odd trolleys just to get in.


Woolies "expect that both earnings per share ("EPS") and headline earnings per share ("HEPS") for the 26 week period to 23 December 2012 will be between 18-24% higher than the corresponding reporting period of the previous year." Inside of that there are transaction costs associated with the Witchery Group, some restructuring plans involving employees, once off and net unrealised foreign exchange losses, which collectively add up to 111 million Rands. "Adjusting for these items, core EPS and core HEPS are expected to be between 33-39% higher than the corresponding reporting period of the previous year." That is what made me sit up, wow, that is a big increase. Expect around 164 cents worth of earnings for the second half, so, somewhere around 330 to 340 cents for the full year. Woolies deserves a slight re-rating, as they have got this morning. Earnings expectations from the analyst community suggests a 17 percent per annum increase for the next three years. Woolies are fairly generous with the dividend. We will review when the numbers hit the screens, the company suggests Valentines Day. Thanks for that!