Australian earnings preview – Woolworths

Australia

Full Year Earnings Preview:

Woolworths Group Ltd (WOW) is an Australian retail group operating primarily in the supermarket sector. Woolworths’ other operations include discount department stores, home improvement, petrol, and hotels. Woolworths along with Coles forms a near-duopoly of Australian supermarkets, accounting for about 80% of the Australian market. It reports its full year numbers on the 27th of August.

Woolworths is a defensive stocks that has benefitted from the Coronavirus impact. The panic buying of toilet paper and pasta in the early days of the pandemic and the social distancing measures which led to the dramatic shift to working from home have driven up both retail and online sales.

During the March quarter 2020, Woolworths posted the strongest quarterly sales growth in more than a decade with group sales rising 10.7% to $16.5 billion. This is despite the 12.9% fall in the hotels and pokies division and the standing down of 8000 workers following the government ban on pubs and clubs and hotels.

Despite the record sales growth in the coronavirus pandemic, earnings is expected to fall between 1.2 to 2.7% due to a cost blow from higher-than-expected costs in repaying underpaid staff, keeping stores safe, automation its supply chain, and restructuring its hotels and drinks business. Consensus statutory EPS estimate is around 130 cents per share.

Technically, the share price of WOW has recovered about 25% from its March $32.12 low. However, it remains about 10% below its peak of $43.96 from earlier this year and appears comfortable within this range. Drilling down a little further, the $38.20/10 price region offers a confluence of horizontal support that is likely to attract buyers. On the topside, resistance comes from the March $41.87 spike high resistance, before the $43.96 all-time high.  

Australian earnings preview – Woolworths

Source Tradingview. The figures stated areas of the 19th of August 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.