Daily ShareChat: Woolworths

By Jenny Ruth

Friday 23rd October 2009

Australia-based Woolworths, which owns the Countdown, Foodtown and Woolworths chains in New Zealand, posted a sold first-quarter sales result, especially in light of current economic conditions and the efforts of competitor Coles, says Tony Sherlock, an analyst at Aegis Equities Research.

Woolworths' Australian food and liquor store sales rose 8% and New Zealand sales were up 4.8%.

"Woolworths has demonstrated the defensive nature of its assets through the current economic slowdown with continued solid sales and earnings growth," Sherlock says.

"We consider the company's retail format to be superior and believe the new 2010 store formats, currently being implemented, will help to deliver above average earnings per share growth," he says.

The company is very well managed with a very strong balance sheet, he says.

"Woolworths' position as a market leader in supermarkets should ensure the company has an effective platform to leverage its expertise into businesses outside its core competencies," he says.

"An attractive acquisition could also spark the share price, though unlikely in the immediate term."

Sherlock has increased his margin forecasts for both the Australian and New Zealand supermarkets and most of Woolworths' other businesses with the exception of hotels and raised his 12 month target for the share price by 8% to $A35.44.

BROKER CALL: Aegis Equities Research rate Woolworths as add.

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