In this article we look at what to expect and how to trade the upcoming Woolworths (JO:WHLJ) 2024 results.
Key Takeaways:
- For the 53 weeks ending 30 June 2024, Woolworths reported a 6.2% growth in turnover and concession sales from continuing operations
- Woolworths' Food segment in South Africa showed robust growth, with turnover and concession sales increasing by 11.2%, driven by high consumer trust and the acquisition of Absolute Pets.
- The Fashion, Beauty, and Home segment faced difficulties due to a weak macroeconomic environment and increased competition from international online retailers, resulting in underperformance compared to other segments.
- The Country Road Group (CRG) in Australia and New Zealand experienced a 6.8% decline in sales for the year, attributed to deteriorating retail conditions, low consumer sentiment, and a prolonged cost of living crisis.
- Woolworths expects a significant decrease in earnings per share (EPS), headline EPS (HEPS), and adjusted diluted HEPS (adHEPS), with projections indicating over 20% lower results compared to the prior period.
Trading update
For the 53 weeks ending 30 June 2024, the Group reported a 6.2% growth in turnover and concession sales from continuing operations, outperforming the market despite challenging trading conditions. The additional week compared to the prior year and the disposal of the David Jones operations impacted comparability. In South Africa, Woolworths' Food segment showed robust growth, while the Fashion, Beauty, and Home segment faced challenges. Country Road Group (CRG) in Australia and New Zealand saw sales decline due to deteriorating retail conditions. Despite a focus on gross profit margins and cost containment, EPS, HEPS, and adHEPS are expected to be lower than the prior period, influenced by weaker trading environments and a non-cash goodwill impairment in CRG’s Politix business.
Growth in Group Turnover and Concession Sales
For the 53 weeks ending 30 June 2024, the Group's turnover and concession sales from continuing operations grew by 6.2%, or 5.6% on a constant currency basis, despite challenging trading conditions. This excludes the David Jones operations disposed of in the prior period.
Impact of Macroeconomic Factors
The Woolworths Food segment in South Africa showed strong growth, with turnover and concession sales increasing by 11.2%, driven by high consumer trust and the acquisition of Absolute Pets. However, the Fashion, Beauty, and Home segment faced challenges due to the weak macro environment and increased competition from international online retailers.
Decline in Country Road Group Sales
The Country Road Group (CRG) in Australia and New Zealand experienced a 6.8% decline in sales for the year, impacted by deteriorating retail conditions, low consumer sentiment, and a prolonged cost of living crisis. Despite this, the Country Road brand saw positive growth, with trading space increasing by 4.0%.
Strategic Investments and Cost Management
The Group maintained its focus on preserving gross profit margins and containing costs while continuing to invest in key strategic initiatives. However, negative operational leverage in both apparel businesses and inflated import costs in CRG led to lower expected earnings per share (EPS), headline EPS (HEPS), and adjusted diluted HEPS (adHEPS) compared to the prior period.
Forecasted Earnings Decrease
EPS, HEPS, and adHEPS for the Total Group are expected to be over 20% lower than the prior period, largely due to macroeconomic challenges, a weaker trading environment, and a non-cash impairment of goodwill in the Politix business. The Group provided constant currency information to illustrate the impact of the Australian dollar on turnover and concession sales growth rates.
Woolworths – technical view
Source: IG charts
The share price of Woolworths has formed a double bottom reversal pattern below the 6020 level. The pattern warns of a short term trend reversal from down to up.
A close above 60.20 would confirm the pattern in which case 64.20 would become the initial resistance target from the move. In this scenario, traders might consider using a close below the 58.65 level as a stop loss indication.