Woolworths expects $1 billion loss, longer turnaround

In late July, Woolworths announced the cutting of 500 jobs and closure of dinozens of outlets in a $1 billion restructure. On Thursday, Woolworths is expected to report a $1 billion loss linked to the restructuring from the company’s failed Masters hardware chain.

But analysts say the supermarket giant would focus on its food and liquor sales, particularly key comparable sales growth figure for the final quarter of 2015/16 after Woolworths reported a first-half loss of $972.7 million in February, the first loss in over 20 years. What investors are expected to focus on are signs that Woolworths’ aggressive food and grocery price reductions are bringing in shoppers from rival Coles, reports News.com.au.

“People will be looking for signs that the price cuts have resulted in sales growth in the fourth quarter,” says Daniel Mueller, senior equities analyst of Forager Funds. Since the market had already priced in the company’s statutory loss and took into account Woolworths’ turnaround plan announced in July, the bigger question which investors would ask is if all the bad news had been priced in the stock.

Another question is if there would be a potential upside or more pain to come, says Julia Lee, analyst of Bell Direct. Based on retail statistics released in June which showed a 0.5 percent decline in supermarket food prices and fierce competition among Woolworths, Coles, Aldi and independent grocers, given this environment, Lee expects Woolworths’ turnaround to take longer.

For the year to June, Woolworths expects earnings before interest and tax between $2.55 billion and $2.57 billion. On Monday, the supermarket giant also announced an overhaul of its loyalty programme less than one year after its revamp.

Ingrid Maes, Woolworths director of loyalty, explains its system of rewarding shoppers only if they purchased orange-tagged items is a failure due to the supermarket not delivering enough orange ticket offers in-store, reports Herald Sun.

VIDEO: Week in Preview 22 Aug 16: Woolworths, Wesfarmers & Healthscope earnings preview

Source: CommSecTV