Woolworth (ASX WOW) is the largest retailer in the ASX 50. Along with Coles, both companies holds a significant portion of the supermarket market share in Australia.
Woolworth Businesses
The company’s main division are segregated in to the following categories.
Australia Food, Liquor & Petrol – This covers the supermarket business and its liquor business such under the Dan Murpy and BWS brands.
EBIT Margin of the segment can be considered high versus international peers. One should note that due to retail market structure in Australia dominated by Woolworths, Coles, IGA and Aldi where local sub markets are dominated by 2 or 3 out of total 4 supermarkets. There is a degree of relative pricing power and the planning regime means it is very difficult for new entrance in the market.
Woolworth New Zealand Supermarkets – Woolworth has a major market position in the New Zealand market.
General Merchandise – The general merchandise category covers BigW which has been struggling pre-Covid due to the onset on shift to online shopping. Coivd has obviously accelerated this trend but it has done well in the overall context of the structural shift. We expect this segment to continue to struggle and would not be surprised if the company decide to further slim down their national footprint.
Hotels – Unbeknownst to some people Woolworth owns and operate one of the largest pub portfolio in Australia. This is due to historical requirement in some states that in order to sell liquor, the operator need a hotel license. The implication for this is an ESG issue as it does own a large portion of pokie license in Australia.
We are always interested in Woolworth’s real estate held on balance sheet. Given the nature of business, there are signification assets on the balance sheet which are held at book value but undoubtedly in the current low interest environment can be realized at much higher value if sold.
These assets are perennially under appreciated by the market. Woolworths has the potential to carry out sale and leaseback transactions to fund future Food and Liquor growth.
Woolworth Dividends
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Woolworth dividend dates are March and September every year. As its earnings are taxed in Australia it has consistently paid fully franked dividends.