Woolworths (WOW) Share Trading Recommendation

Submitted by Craig Strzelecki on 1 February, 2007 - 22:18

Woolworths (WOW) has a new share price target of $23.10 (was $22.60) from analyst Citigroup Investment Research (CIR). Woolworths reported impressive 2Q07 sales growth of 11.5%. The strength in underlying growth should drive higher EBIT margins. CIR now forecast 26% NPAT growth for FY07e and expect WOW to increase its existing 16%-21% NPAT growth guidance range. CIR have increased our FY07e EPS by 1.9% and FY08e by 1.7 The Australian Food & Liquor division reported comparable store sales growth of 6.4%, an acceleration from 1Q07 growth of 4.9%. The company took approximately one percentage point of market share. Given strength in underlying volumes, we estimate the leverage impact for F&L Australia’s margins is 30bp. Unit cost growth is close to 3% and marketing and depreciation costs are fixed. The strong sales growth also lifts staff productivity. The company indicated supermarket inflation remained at 4% in 2Q07. However, since the end of the quarter, inflation has fallen with lower fresh produce prices. CIR expect lower inflation in 2007 in many categories as cost pressures from higher oil prices and the drought abate. Woolworths has lost market share in NZ because rival Foodstuffs has opened a large number of stores. WOW is addressing the current price gap, but Foodstuffs continues to retaliate with aggressive promotional activity.

Woolworths Limited is listed on the Australian Stock Exchange (ASX) under stock code WOW. You can view their investor website here. WOW was listed on the ASX on 12 July, 1993。 Michael Gerard Luscombe is the CEO and James A Strong the Chairman fir Woolworths. The company offers Food, general merchandise and specialty retailing through chain store operations. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade WOW. Check your charts and good luck with your share trading!

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