Is it time to buy Woolworths (ASX: WOW) shares after reporting a bumper quarter?
What is Woolworths?
Woolworths was founded in 1924 by Percy Christmas, with its first store opening in Sydney’s Imperial Arcade. Woolworths has gone on to become Australia’s largest supermarket business, operating Woolworths supermarkets in Australia and Countdown in New Zealand. It also runs the retail department store Big W as well as liquor stores Dan Murphy’s and BWS. With over 3,000 stores and more than 200,000 employees, it’s one of Australia’s largest employers.
What did Woolworths reveal?
Total third quarter sales from continuing operations (which excludes Petrol) grew by 10.7% to $16.5 billion. Australian Food sales grew by 11.3% to $11.17 billion, with 10.3% comparable growth.
In New Zealand dollar terms, New Zealand Food sales increased by 13.7% to NZ$1.925 billion with comparable growth of 13.4%.
BIG W sales rose by 9.5% to $866 million with comparable growth of 9.9%. Big W is expected to make a small profit in FY20.
Endeavour Drinks managed to increase its sales by 9.5% with comparable growth of 8.9%.
However, Hotels revenue dropped 12.9% with comparable growth of 2.4% due to COVID-19 hotel closures.
As you can imagine, online sales were an important part of delivering products to customers. Group online sales increased by 34% to $817 million.
Is it time to buy Woolworths shares?
Woolworths said that sales growth across the company has continued in April although growth rates have moderated compared to March. Australian Food sales growth in the first three weeks of April is “in the mid-single digits” with Drinks sales growth broadly back to pre-COVID-19 levels.
It’s hard to predict what sales will do for the rest of the financial year.
However, higher costs are expected to continue with higher staff costs, additional warehouse capacity, the scaling up of home delivery, security, cleaning and personal protective equipment. These extra costs are expected to be in the range of $220 million to $275 million.
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
