Business

Lakewood Capital Short Woolworths Limited Tanks Nearly 10%

Woolsworths Limited, the largest supermarket chain operator in Australia and New Zealand reported that its earnings declined after significant items for the half-year of fiscal 2015.

Woolworths Limited

The company also announced that its supermarket business has a new leadership team and structure. As a result, the stock price of Woolworths Limited plummeted almost 10% to AUD$30.41 per share at the Australian Securities Exchange (ASX) on Friday.

Woolworths Limited Half-Year FY15 performance

Woolworths Limited reported that its net profit after tax declined 3.1% to $1.28 billion during the half-year of its fiscal 2015. The company said its earnings per share dropped 3.9% to 102 cents.

Before significant items, Woolworth Limited said its sales increased 1.8% to $32.4 billion. Its earnings before interest and tax climbed 4% to $2.12 billion. Its net profit after tax rose 4.7% to $1.38 billion. Its Earnings per share were 110.3 %, an increase of 4%.

The board of directors of company said its fully franked HY15 dividend was 67 cents per share, up from 65 cents last year.

Woolsworth Limited said the ongoing transformation in its BIG W business continues to affect the performance of its General Merchandise.

The additional Victorian gaming tax, which was implemented on May 2014, impacted its Hotel earnings. The business was also affected by the portfolio divestment of a freehold hotel sites in October.

“Cost savings have enabled us to continue to invest in lower prices. In Australian Supermarkets, customers benefited from lower average prices as reflected by deflation of 1.8% for the half year,” according to Grant O’Brien, CEO of Woolworths Limited.

Woolworths Limited management changes

Woolsworth Limited created a new leadership team and structure at its supermarkets business after the resignation of its Managing Director Tjeerd Jegen.

The company appointed Brad Banducci as Managing Director of Australian Food and Liquor. He will also continue to lead Woolworths Liquor Group until the company appoints a new executive to assume the position.

Dave Chambers was also named Director, Woolworths Supermarkets. He will report to Banducci.

In its Petrol business, Woolworths Limited also announced that its agreement with Caltex was made to allow the company to focus its efforts in operated sites and deliver further improvement to offering convenience to consumers.

“The actions announced today to protect our market leading position will deliver sustainable returns for both customers and shareholders into the future,” said Ralph Waters, chairman of Woolworths Limited.

Woolworths Limited is an attractive short opportunity, says Lakewood

Anthony Bozza’s Lakewood Capital Management recently stated that Woolworths Limited is an attractive short opportunity. The firm cited the reason that the supermarket giant is facing increasing competitive pressures combined with elevated margins and stretched valuation.

Lakewood Capital predicted that the supermarket giant would experience earnings pressure and multiple compressions. Investors would realize that the company is not a defensive and steady growth story.

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