Research archive for WHL

Yesterday we received another set of solid full year results from our favoured retail stock, Woolworths. Lets delve into the numbers straight away and then we can discuss the different segments.

Woolworths released six month results yesterday morning. We had already been sort of primed during the course of last month, the 26 week trading statement was released on the 14th of January. Group sales increased 17.1 percent, if you exclude David Jones (acquired on the 1 August 2014), sales grew by 12.3 percent. Basic and headline earnings grew 52.8 and 44.9 percent respectively. Headline Earnings Per Share grew by just 3.6 percent, remember that there are far more shares in issue now, due to the rights issue. Clothing and General Merchandise sales grew 12.5 percent, a pretty pleasing result. The Food business grew sales by 12.1 percent, with price movement (inflation) of 5.7 percent. It all looked OK, Ian Moir suggested in an interview that they continued to take market share across their respective businesses.

Woolworths released a trading update on Thursday, we ran out of time to cover it Friday. This wraps awfully on the Woolworths website, perhaps it is just my browser: Trading update and trading statement: 26 weeks ended 27 December 2015. Group sales, as you can see increased a pretty remarkable 17.1 percent, excluding David Jones (perhaps for the last time during this year), group sales increased 12.3 percent. Inside of the David Jones stores the shift to Woolies owned brands is evident and being well received, Country Road in Australia is definitely a beneficiary.

There was a Woolworths trading update released after the market closed last evening. This was for a 20 week period, the first of the current financial year and the lead into the stronger 6 week trading period to the day after Christmas. Group sales increased by nearly 18 percent, when compared to the comparable period in 2015, excluding David Jones group sales showed a more modest 11.7 percent increase. David Jones sales increased 12.2 percent in Aussie Dollars, Country Road sales down under (Aussie) and in the land of the long white cloud (Aotearoa or New Zealand) grew 14.2 percent. In Aussie Dollar terms. Most of that was as a result of space reallocated from other brands in David Jones stores, out with the old brands and in with the Woolies brands.

Woolworths have released results for the 52 weeks to end June, remembering that these numbers include 11 months of David Jones. Total revenue of 58 billion Rands is an increase of 45.4 percent on last year, including concession sales revenues grew by 54.9 percent (excluding David Jones it is 12 percent). Adjusted profit before tax grew 20.5 percent. The food business was the great standout, total sales there were up 13.5 percent with the supermarket model working well.

Woolworths have released a 52 week trading statement this morning, group sales up a whopping 54.9 percent, if you exclude the David Jones contribution, group sales were up 12 percent. I suspect that it may take a while to normalise and get used to the greater contribution from Down Under, the business is going to have a 50/50 split between here and Australasia. Food sales grew 13.5 percent here locally, comparable store sales grew 6.6 percent. Local clothing sales were not exactly strong, 4 percent across comparable stores, 9.6 percent in total. Aussie and New Zealand was strong, Country Road sales in those two currencies grew 11.5 percent, an aggressive store space rollout inside of David Jones had a positive impact. The only negative I can see is that the impairment rate increased from 4.8 percent to 5.4 percent. A progressive dividend policy and a quality premium attached to the securities of this business should see this trading update as a neutral, perhaps a touch light. We do however think that this is the best of the retailers that we have access to here in the South African market, well run, brilliance in terms of quality and mix.

Woolworths released a strategic view and investor update of both David Jones and The Country Road Group on their website Friday, the actual presentation was the week prior. The Woolies share price has been moving northwards, getting close to raising its bat (a cricket term when a batter reaches a milestone, some like AB do it often in a single innings, fewer balls faced), 100 Rand has a nice ring to it.

Why would Woolworths partner with Pharrell Williams? Sure, he wears great hats, he has similar sounding (too similar) songs to Marvin Gaye. He gave an interview with Seth Meyers two nights ago in which he (Williams) suggested that he was fired from his job at McDonald's for being lazy. True story, not just once, three times in total. Pharrell actually wrote the song "I'm Lovin' It", which was then used as a jingle by McDonald's. The song was sung (and co-written) by Justin Timberlake, back in 2003. You know the jingle part on the McDonald's adverts. Irony, getting fired by McDonald's three times and then having them using your song for their jingle. Oh, and did we say that Williams is pretty darn cool, he looks great for a 42 year old (yes) and has pretty good style, even as a fashion loser I can see that.

Woolworths have released their results for the first half this morning. This is the first half that includes David Jones from 1 August 2014, there are however no comparable figures. So we have to look at the group as a whole, which integrates David Jones, it does not have a comparable period however. This makes this period of adjustment hard for those who love comparisons and patterns to appear and then to measure that against your expectations. Here goes, for the 26 weeks to end December the 28th 2014. Revenue grew to 30.3 billion Rand (excluding David Jones, an increase of 12.5 percent), pre tax profits were 2.9 billion Rand. Clothing sales in South Africa grew 9.4 percent, add merchandise and that is lower at 8 percent with profits in this division growing only 2.7 percent. Children clothing, footwear and accessories having a rough time of it.

Woolworths have released a sales update for the first 26 weeks of their financial year to end 28 December. So I guess no New Years sales in there. Excluding the impact of David Jones, group sales increased 12.5 percent. Total sales, including David Jones were up 55.2 percent, just showing you how huge the shift has been for the company. The ability to change the landscape of Australian retail should not be underestimated, David Jones could be huge, no doubt there are big plans afoot. So far the market likes the sales update, the stock is up 2.8 percent in early trade. Results are expected to be around the 12th of February. Exciting times, wait for more analysis when it comes!

Woolworths have released a trading update for 20 weeks to 16 November, which includes David Jones in the numbers for the first time (effective 1 August), here is a little snippet: "Group sales increased by 47.5% for the first 20 weeks of the 2015 financial year over the comparable 20-week period in 2014. Excluding the impact of David Jones, Group sales grew by 11.9%." You must remember now that there are three operating subsidiaries, there is the South African Woolworths, then there is Country Road and now there is David Jones. They will report separately on these three, all the sales of merchandise under the Country Road in South Africa will be reported on as Woolworths. It seems from a pretty quick review of the trading update (that coincides with the annual report and ahead of the AGM next week) that all is good. A couple of people I speak to now say that they are working hard on the food side and are starting to make huge progress in the local market, winning market share. Good news. What is not good news is that the share price has fallen, the big issue I think is food price inflation, the lower energy prices will help consumers in the coming months.

Yesterday BusinessDay posted this article titled Woolies energy down 38% since 2004. Here is an extract which summarises the crux of the matter.

Woolworths are going to trade ex the rights on Monday. What does that mean? Well, it is pretty simple. Let us say that you bought the shares today at 80 Rand, that would be a value (if you bought 100) of 8000 Rand. On Monday the stock trades ex the rights (of 22 per 100), but equally the rights become tradable in the open market in due course.

The Woolworths rights announcement came yesterday. I was a bit shocked at the deep discounted price, I was not expecting that. Having said that, the company raises the same amount of money, if you do not follow your rights here you will be diluted. So, you must follow your rights, we will deal with all of our clients separately. If you are not a client of Vestact and want to be, it is simple enough, email us!

That was quick. Woolworths using their good results from yesterday, the fact that they were favourably received by the market in order to hit the rights issue quickly. They are looking to raise 10 billion Rand through a fully underwritten renounceable rights offer, a billion Rand more than the Equity Bridge Facility (excluding the costs associated with that facility). The current market capitalisation was 66.9 billion Rand last evening. That is at the current price around 14.94 percent of the company, obviously there will have to be a discount offered to shareholders, let us presume around 7 percent (73.52), which means around 16 per 100 shares, or roughly 15 percent of your current value of Woolworths.