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 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: