Woolworths Limited (WOW $25.45) Recommendation: Accumulate Risk Rating: Low 4th quarter 2008 Sales - Store Refurbishments Remain a Key Driver �� WOW reported total sales of $47.0bn for 2008, up 10.7% on the prior corresponding period on a statutory basis, and ahead of OML forecasts of 9.2%. �� Refurbishments to the store format continue to deliver strong sales and margin performance in Australian Food & Liquor and will be a driver of sustained earnings growth for the company. �� Australian Food & Liquor continues to perform strongly, despite the rate of like for like sales growth moderating, and New Zealand Supermarkets disappointed with weak sales. As a result, operating de-leverage is likely as supply chain and other cost reduction programmes have yet to mature. �� Following this sales release, we have reduced our 2009 and 2010 eanrings forecasts by 2.3% and 3.0%, respectively, due to a reduction in the rate of sales growth, and a moderation in earnings margins. We retain our 30 June 2009 share price target of $32.40 per share. �� We suggest the current WOW stock price represents an attractive entry point for an investor and reiterate the following key qualities; sustainable sales growth, strong rate of earnings growth, leading industry position, history of delivering, and defensive earnings stream.
WOW Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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