Daily ShareChat: Woolworths

By Jenny Ruth

Woolworths, which owns the Woolworths, Countdown and Foodtown supermarkets and Dick Smiths chains in New Zealand, produced a respectable but not outstanding second quarter sales result, says Tony Sherlock at Aegis Equities Research.

The company's second quarter sales rose 4.1% to $A13.9 billion ($NZ17.5 billion) with New Zealand supermarkets sales up 4.1% in New Zealand dollars but down 2.2% in Australian dollars.

Sherlock says he had expected the Australian Food and Liquor division's sales to be up 6.5% but they rose only 5.9%, down from the 7.1% increase recorded in the first quarter.

Nevertheless, he still favours the stock: "We believe economic conditions in Australia and New Zealand have continued to improve, reinforcing our positive view on the stock."

He considers the company's retail format to be superior and that new 2010 store formats currently being implemented will help deliver above-average earnings per share growth.

"The company is very well managed, has a very robust balance sheet and strong competitive position." While it trades at a high forward price-to-earnings multiple, earnings per share growth is strong and the company has very little debt, Sherlock says.

The company's guidance for net profit for the year ending June is growth between 8% and 11%.

BROKER CALL:  Aegis Equities Research rate Woolworths as add.

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

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