fy sales, page-5

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.