Woolworths Group Limited

Positive Outlook: While ALDI has been identified to be topping the most trusted brands in Australia as per the Net Trust Score survey by market research company Roy Morgan, Woolworths Group Limited (ASX: WOW) is leaving no stone unturned for trying to keep its market share at a higher notch among the competitors. WOW has recently entered into a long-term strategic alliance with Caltex with the objective of increasing the network of fuel sites where its customers can redeem their fuel discounts and earn its Rewards points, expand its Metro convenience footprint. According to the agreement, the group and Caltex will co-create and roll-out a market convenience offering under the Metro banner to up to 250 Caltex sites over the next 6 years with 50 sites planned over the next two years. We expect that this synergistic deal will augur for growth ahead.

Besides this, the company delivered a decent set of sales quarterly results wherein the company recorded overall sales growth of 4.3% on year on year (YoY) basis to $14,244 Mn in Q3 FY18 from $13,660 Mn in Q3 FY17. The sales surged due to improvement in its product mix growth during the same period.  Further, the management stated thatthe business has now shifted from a turnaround phase to transformation and is looking for several opportunities which will support to improve the business portfolio in upcoming years. RoE and RoICsubstantially increased from 6.6% and 4.9% to 9.2% and 6.8% in 1HFY18 as against of the previous half. Meanwhile, the share price has risen 14.56 per cent in the past three months (as at July 10, 2018) and trading close to the higher level. While the ASX market faced a bit of a pressure with global level trade fears, WOW still managed to move up by about 1.427% on July 11, 2018.

Based on the aforesaid facts, we maintain our “Hold” recommendation on the stock at the current market price of $ 31.28.


Third Quarter Sales Highlights (Source: Company Reports)

 
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