Woolworths’ Weak Earnings Growth Doesn’t Justify Its High P/E Multiple. AUD 24.50 Unchanged
Narrow-moat Woolworths Group delivered a weak result across all noncore business, with all of them posting a decline in operating profit--or in the case of Big W continued losses--in the first half of fiscal 2019. In line with our thesis, a material profitability expansion in the core Australian food business proved evasive, with EBIT margins increasing by a mere 8 basis points in the half. We were surprised by a short-term slow-down in the liquor and hotels segments’ sales growth and EBIT margi...Woolworths Group is organized into five segments: Australian Food and Petrol, which involves the procurement of food and petroleum products for resale to customers in Australia; New Zealand Supermarkets, which involves the procurement of food and liquor and products for resale to customers in New Zealand; Endeavour Drinks Group, which involves the procurement of liquor products for resale to customers in Australia; BIG W, which involves the procurement of discount general merchandise products for resale to customers in Australia; as well as Hotels, which involves the provision of leisure and hospitality services, accommodation, entertainment and gaming in Australia.
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