A SLIPPERY SLOPE WITH JSE:WHL


Investing & Money
piece written on the 13th February 2014 by  

Instead of putting money down on 7, 11, 13, 27, 31 and red I decided to rather place my chips on Woolworths as I felt calculating their ability against that of wind and dealer strength would result in a more calculated¬†investment. So, a few months ago I rolled the dice and invested in Woolworths. Unfortunately, my lack of experience didn’t have me thinking that the JSE was performing incredibly strongly and that I would be investing at a high point in general, a great shame because the price has only tanked since then. In fact, my investment is down 26.29% compared to my shares in BHP which are up 25.12%, it’s quite a sad state of affairs. Sure, these are blue chippers and should be seen as long term investments, but it’s still sobering.

Woolworths logo
woolworths-share-jse

Woolworths have just announced their interim results for the half year mark, which ended on December 29, 2013. There are a lot of numbers, but here’s a summary thanks to various resources:

  • Sales up 16.2%
  • HEPS increased by 17.2% R1.92 per share.
  • EPS increased by 17% to R1,91 per share.
  • Profit Before tax increased by 21.1%
  • Headline Earnings increased by 18.5%
  • Adjusted HEPS of 12.9%, impacted by a foreign exchange loss of R54 million (R16 Million in the previous period)

Some more insight:

  • Clothing and Merchandise Sales up 9.7%
  • Clothing alone up 10.1%
  • Gross Profit Margin dropped 0.4% to 45.7% due to investment in entry price points as well as in-season promotions.
  • Food Sales up 15.3%
  • Other Operating costs grew by 16%

And then of course there’s the Country Road Group of which 88% is owned by Woolworths:

  • Sales up 27.5%
  • Gross Margin increased from 61.3% to 63%
  • 50% Increase in Profit Before tax to A$51 Million (R505,4 Million) (from A$34 Million)
  • As for the Country Road Group, the products sold are high-fashion, trendy, designer-ware. With a 63% gross margin, this is a very profitable business. .

What’s interesting here is that these results are pretty darn good, I wouldn’t mind those figures on my side but what I don’t quite understand is why the share price remains so dismal. Unfortunately, due to this we’ve seen the share price drop a further 4.25% today to close at R58.75 which is almost the lowest it’s traded at in the past year.

Your additional reading: