Woolworths (Hold, TP ZAR 92.5/share) H1 17A trading update shows improvements in top line momentum but likely weaker margins
- WHL SA clothing (33% of EBIT) released stronger numbers with implied negative volume growth in H1 17A of -6.1% y/y versus -7.8% y/y for the 19 week period of H1 17A. Divisional revenue grew by 3.5% y/y in H1 17A accelerating from 2.0% (19 week update), ahead of ACe of 2.6% y/y.
- WHL Food (26% of EBIT) showed a slight improvement with its top-line growth accelerating from 9.1% y/y (19 week update) to 9.5% y/y in H1 17A, ahead of ACe of 8.9% y/y. LfL growth was improved to 5.6% y/y, implying negative volume growth of 3.6% y/y (19 weeks: -4.3% y/y).
- DJ revenue (24% of EBIT) slowed to -0.3% y/y in H1 17A from 2.2% y/y in the 19 weeks of H1 17A, below ACe of 5.7% y/y, mainly due to Boxing Day falling in H2 17e. Adjusted for Boxing Day and one-offs DJ revenues were up 4.0% y/y, decent improvement from 2.2% y/y showed in 19 weeks.
- CRG (15% of EBIT) showed improved momentum in constant currency, with its top-line declining by 0.2% y/y in H1 17A (ahead of ACe: -2.3% y/y in AUD, accelerating from -2.8% in the 19 weeks of H1 17A). Adjusted for Boxing Day sales and one-off revenue declined by 0.9% y/y.
- Woolworths Financial Services annualized impairment rate for H1 17A increased to 5.9%, down from 6.4% in the 19 weeks of H1 17A. WHL group sales revenue increased by 6.7% y/y in H1 17A ahead of ACe of 6.3% y/y, slowing from 8.9% y/y growth in the 19 weeks of H1 17A.
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