Daily ShareChat: Woolworths

By Jenny Ruth

Thursday 30th July 2009

Australia-based Woolworths' position as market leader in the supermarkets business should "ensure the company has an effective platform to leverage its expertise into businesses outside its core competencies," says Aegis Equities Research analyst Ben Brownette.

The company, which owns the Woolworths, Countdown and Foodtown supermarkets in New Zealand, reported fourth quarter normalised sales growth of 9.1%, excluding petrol. New Zealand fourth quarter sales were up 4.8% to $1.12 billion, taking annual sales to $5 billion, up 3.9%.

"Although we would prefer to see the New Zealand supermarkets performing a lot better, our expectations are low in the short term," Brownette says.

"In the medium to long term, we are confident the new store format and more strategic placement will drive sales and earnings," he says.

The defensive nature of Woolworths' assets and its market position should mean earnings are well insulated from a slowing Australian economy.

"An attractive acquisition could also spark the share price, although unlikely in the immediate term," he says. He notes the company has very little debt.

Woolworths and New Zealand-based Foodstuffs had been vying to buy The Warehouse Group discount stores chain but were blocked by legal action taken by the Commerce Commission.

BROKER CALL: Aegis Equities Research rate Woolworths as add (from buy).

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