WOW - Woolworths

[drillfix]

I honestly dont know how they (woolworths) can say what they have. Every time I walk into a woolies, the cue is a mile long by nearly every check out. Most times I get there, I cant get the bakery bread I want because its always sold out, and sometimes same as the Anzac cookies, so how can they say they are not as profitable?

Perhaps they paid the Directors more, thus making less for shareholders.

I dont hold, but I swear over the past year, things appear to be busier there, (where I live anyway).

[ratkin]

I honestly dont know how they (woolworths) can say what they have. Every time I walk into a woolies, the cue is a mile long by nearly every check out. Most times I get there, I cant get the bakery bread I want because its always sold out, and sometimes same as the Anzac cookies, so how can they say they are not as profitable?

Perhaps they paid the Directors more, thus making less for shareholders.

I dont hold, but I swear over the past year, things appear to be busier there, (where I live anyway).

They have been busier , six percent up on last year , just not as busier as they expected

[macduffy]

Some well-reasoned comment here from Ian Verrender of the SMH.

http://www.smh.com.au/business/woolw...124-1a2va.html

Disc: Not holding WOW but always looking for the right opportunity!

[OldRider]

The reaction to the latest WOW announcement is more than I would have expected. My view is that WOW will perform as well as or better than
most other companies in the next year, so either expect wider similar announcements and consequent price drops, or else be prepared to
buy a few as soon as they turn upwards.

[modandm]

WOW = slow and steady - and I'd say it is unlikely the can continue to perform as well as they have so far. Also there are lower cost competitors such as aldi which are growing.

A good share for a retiree but not something to get excited about. Probabally good for 7-9% return on average p.a from now on to forever. Better off buying BHP imho

[Snoopy]

It seems the gloss is fading from WOW with concerns about future growth prospects.

Woolworths has a new idea to restore some gloss.

Woolworths is in the news with the creation of the SCA property fund. The idea of this fund is to float off in one lump all of the supermarkets that Woolworths have developed since the GFC hit, as Woolworths consider their best use of capital is in the retail business, not actually owing the underlying property. This is probably fair enough. However there is a sting in the tail for NZ holders of Woolworths. Existing WOW shareholders will get shares allocated to them in the ratio of one share in the new company for every five shares they already own. However this is being accomplished by the new shares being issued in the form of a combined special dividend and capital return. It is structured this way because Australian shareholders can take advantage of the franking credits associated with this dividend. NZ shareholders cannot do this. So the effect of the SCA issue for NZ based WOW shareholders is that NZ shareholders will be getting a taxable capital return in the form of this special 'dividend'.

NZ shareholders have a chance to vote on whether this capital return goes ahead. Could I suggest to NZ based shareholders that they vote against this scheme. In the grand manner of these events such a gesture will be ultimately futile as there will be too many Oz based shareholders voting in their own self interest for the scheme. However, it would not hurt to make those Aussie based directors take note of a small but significant protest vote from New Zealand!

The other way to get around this is to sell your WOW shares before the entitlement date and buy back in afterwards. That would preserve your capital, but might not be worth in trading fees given the relatively small size of the SCA issue.

SNOOPY

[ENP]

Woolworths has a new idea to restore some gloss.

Unless WOW invests significantly outside on Australia and NZ then the growth and long term return prospects aren't terribly great, taking into account it is priced up around the 20 P/E mark.

Why not sell and buy Coca Cola Amatil instead? It's a similar sort of business but has investments in the pacific, asia, etc and is trading at only 14 times earnings.

[Snoopy]

Unless WOW invests significantly outside on Australia and NZ then the growth and long term return prospects aren't terribly great, taking into account it is priced up around the 20 P/E mark.

Why not sell and buy Coca Cola Amatil instead? It's a similar sort of business but has investments in the pacific, asia, etc and is trading at only 14 times earnings.

You may well be right ENP. I hadn't realized that the PE of CCA had got down to 14. One negative you didn't mention is that for their 'core' product CCA are restricted in what they do by master franchise holder, Coca Cola of the United States.

Getting back to WOW. I know a PE of 20 looks expensive, but for all of my sharemarket memory WOW has looked expensive. I remember opening an e-trade account in Australia with the express idea of selling my WOW that did look overvalued at the time. The price at the time was around $8 IIRC. Needless today I am glad a saw sense and did not sell. But that was then and now is now. Obviously the core supermarket business is getting harder to expand by geographic footprint because of the sheer number of stores that already exist.

The future for WOW growth looks to be their new hardware/ home improvement chain, and perhaps hotels? Did you know that WOW are now the largest operator of pokie machines in Australia?. But there are risks in this strategy. You are right. I do need to have a good look at my WOW investment again.

SNOOPY

[ENP]

The price at the time was around $8 IIRC.

The future for WOW growth looks to be their new hardware/ home improvement chain, and perhaps hotels? Did you know that WOW are now the largest operator of pokie machines in Australia?

I do need to have a good look at my WOW investment again.

Well done on keeping it from $8 all the way to today, enjoying all those dividends along the way. It seems to be a company that centainly meets your income needs.

Yes, I've been watching with some interest around the restructuring and the diversification of it's different businesses. Masters Home Improvement seems to have been the biggest winner for them. I don't like the volatility of the hotels or the gambling however, this doesn't seem to be as easy to predict a consistent revenue and profit from. One only has to look at ASX or NZX listed companies who has these industries as their core business and look and the yo-yo of up and down year by year perfomance from each. Getting out of Dick Smith (even though they sold for a $20 million price tag which was very very low) I thought was a good idea. Getting out of the property of their supermarkets I see the benefits, but then wonder with all the excess funds, where will they deploy it to earn high returns?

I guess it totally depends on what you want out of the investment. Getting a 4.4% odd dividend return that is going to grow each year around 3-5% is not a too bader deal when you look at the income alternatives of bank deposits and government/corporate bonds. You are in a drastically different life stage to myself and we have different objectives as to what we want out of a portfolio.

[Silverlight]

Why not sell and buy Coca Cola Amatil instead? It's a similar sort of business but has investments in the pacific, asia, etc and is trading at only 14 times earnings.

Hi ENP, what if you already own both?

I don't think I would want to own that much Coke, and the scope to invest my WOW dollars into another staple consumer businesses is limited, Metcash maybe, but a lot for risk. For context I hold Wesfarmers already.