Weaker than expected
Retail trading updates are starting to arrive and they show tough conditions, with Woolworths* seeing negative growth when looking at like-for-like sales less product inflation. The question is whether it is losing market share to competitors or if the market is shrinking. I suspect the former but we’ll need to see more trading updates from other retailers (especially the middle and lower-income retailers) to get a clearer picture. Woolies also offers an important illustration of why headline earnings per share (HEPS) is a much better indication of profits rather than straight earnings per share (EPS). EPS is expected to be 30% to 40% higher, but this includes the profits from the sale of the Market Street property in Sydney. As always, HEPS excludes these sorts of one-off events and is expected to be 2.5% to 7.5% weaker. Overall, this update is weaker than I expected and my expected 6% HEPS increase for the full year is now unlikely. That all said, I still hold the stock and am very comfortable adding more below 7 000c.
A high-heeled shoe on display inside an Office fashion footwear store, which is operated by Office Retail Group. Truworths holds a majority share in Office Retail Group.