More on Woolworths
Woolworths: AGM trading statement
Sales in the retail business continued to slide but this also continued to be offset by growth in the music and video wholesale and publishing business - total sales were almost unchanged, down just 0.4% so far this year.
The high growth in wholesale sales outside the group (i.e. not to Woolworths shops) of 21.2% is encouraging, but the benefit of this will be diluted by lower growth in sales within the group and wholesale revenues are likely to be up by around 10% in total.
Growth at the joint venture with the BBC has slowed to 4%, which further diluted the growth of the wholesale and publishing business.
Finally the very poor performance of retail offset the growth in wholesale and publishing with with like-for-like sales down 6.2% even after adjusting for closures for refits. The improvement expected from refits should justs about offset this year’s decline - not a very good result for a company trying to offset several years of decline.
Despite its poor performance Woolworths is beginning to look interesting. The wholesale business is performing well and The joint venture with the BBC has strong content to sell. Even assuming that the decline in retail can not be reversed, it is a profitable declining business that has some value.
Given all the above the historical PE of 11× and, even more, the 5.7% yield are reasonable value even though we expect a significant EPS decline this year that might push the prospective PE up to 15× and stability rather than growth in the medium term.
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