Big plans

Finweek English Edition - - Marketplace - Go long: Stay short: ed­i­to­rial@fin­week.co.za Mox­ima Gama

the up­mar­ket re­tailer Wool­worths, which sells cloth­ing, gro­ceries and home­ware, has been hit hard by tough trad­ing con­di­tions at home and in Aus­tralia this year, with head­line earn­ings per share for the 52 weeks to 25 June ex­pected to de­cline by be­tween 5% and 10%.

The group said in a trad­ing state­ment that its cloth­ing and gen­eral mer­chan­dise busi­nesses in SA, as well as David Jones in Aus­tralia, were par­tic­u­larly slug­gish, with sales growth of 1.4% and 1% re­spec­tively. Food sales growth in SA re­mained above mar­ket dur­ing the pe­riod, with sales in­creas­ing by 8.6%. Wool­worths is ex­pected to re­lease its re­sults on 24 Au­gust. On the charts:

Wool­worths’ share price has plum­meted from a high of 10 800c/share in Novem­ber 2015 and is now trad­ing close to three­year lows at 5 855c/share.

As part of its growth strat­egy, Wool­worths is tar­get­ing a big­ger slice of the beauty mar­ket and aims to con­tinue im­prov­ing its food of­fer­ing to main­tain its po­si­tion as mar­ket leader in high-end food re­tail.

How to trade it:

Wool­worths is tee­ter­ing on its long-term sup­port trend­line dated back to 2012. Sup­port kept at 5 855c/share would be a pos­i­tive sign, as Wool­worths could es­cape cur­rent bear­ish­ness above 6 725c/share. A more sub­stan­tial buy­ing op­por­tu­nity would be trig­gered above 7 660c/share, with po­ten­tial gains to 8 700c/ share and then 9 650c/share.

Alarm bells should sound be­low 5 855c/share, as a neg­a­tive break­out out of the ma­jor bull trend would be con­firmed on down­side through 5 485c/ share. Sell­ing to 4 730c/share, and pos­si­bly to 4 300c/share, could then en­sue. ■

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