Friday, 29 August 2014

Woolworths Holdings Limited

It seems not ready to go beyond R79.50! Wait for the Break!

WOOLWORTHS is building bigger stores and more of them as it bids to woo its competitors’ grocery shoppers by offering broader ranges, branded goods and bulk.
Now, through a supermarket play, the no-longer niche retailer is tackling Pick n Pay and Checkers head-on as it aims to convert basket shoppers to trolley shoppers through bargains and promotions intended to sway shopper perception.
Woolworths’ core high-income customers are less-price sensitive. This has insulated the retailer from the constrained consumer spending environment facing its peers.
"Customers that haven’t shopped with us before are coming in because of the promotional activities we’re running mid-month and month-end," CEO Ian Moir said on Thursday. "We’ve invested half a percent of our gross margin into taking our prices down… to make sure that in the minds of customers we represent value and they no longer see Woolies as an expensive food shop."
In the full year to June 29, Woolworth’s grew its food business space 8.1%, the group reported on Thursday. This was driven primarily by the broader range of brands it now sells.
While Woolworths ran the risk of high-end consumers trading down if the environment got too tough, they seemed to be managing their relative pricing well, said Meryl Pick, Old Mutual Investment Group equities analyst. "They have a specific pricing and product range strategy to increase their market share within middle-and high-income markets by offering more branded goods.
"A few years ago you would only find Woolies private label products in stores, which meant consumers had to shop at a regular supermarket for branded fast-moving consumer goods."
Stock-keeping units at the group have increased from 6,400 five years ago to 11,000.
Alec Abraham, a senior equity analyst at Sasfin Securities, said Woolworths " owned" the top-end food customer. "They are certainly taking market share away from Pick n Pay.
"Woolworths have keen pricing particularly on the national brands. Previously they charged more for Koo baked beans, now they don’t. We will see both a continuation of them taking market share and a changing pricing perception among shoppers."
Woolworths will grow its retail space 9.1% for food in the coming year. Capital expenditure of R2.7bn has been pencilled in for the 2015 financial year — this includes investment in distribution centres in SA and Australia as well.
Shoprite and Pick n Pay are also adding space aggressively, particularly in underpenetrated areas, as slowing growth in SA weighs on profits.
"Woolworths’s food business is still small relative to big players (such as) Shoprite and Pick n Pay, so they’re growing off a small base ," Ms Pick said. "I don’t think it’s too aggressive (though) — some of the new space is store expansions rather than completely new stores, which makes it easier to grow into.
"In terms of clothing and general merchandise, a big component of space growth is to support the roll-out of Country Road, Witchery and MIMCO brands. We only see a fraction of the range that is available in Australia so this has legs.
Woolworths reported a 9% increase in headline earnings per share to 365.2c for the reporting period. Revenue advanced 12.8% to R39.9bn.
Article Courtesy of Business Day Live