WOW
The Woolworths quarterly sales update leads with the fairly bearish sounding pull quote of “most challenging COVID quarter”.
The supply chain issues are writ large in the quarterly and half yearly results commentary everywhere (e.g similar messages over the US reporting season, which is playing out now) and are obvious hurdles to maintaining margins.
The second important piece of news is the completely unsurprising slow down in food sales, as COVID reopening means people spending a larger share of wallet on things other than eating, specifically, eating at home.
However, this unsurprising combination of themes (supply chain issues, slowing food sales)) does not appear reflected in the multiples people are willing to pay for the business, to our mind.
COVID beneficiaries, especially defensive COVID beneficiaries, are quite expensive as a strategic theme, and, we think WOW fits firmly into that category.
We think COL is quite a bit cheaper, for essentially the same characteristics, but in general we are underweight the sector on valuation grounds, and earnings trajectory assumptions.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.