Woolworths Continues Rally from Strategic Turn Around

Friday last week saw investors put Woolworths under the microscope. They were able to finally see how Woolworths fared for the first half of 2016. Of course, when Woolworths posted a net loss, it fell in line with analyst expectations.

The net loss amounted to $972.7 million for the period.

It was clear they needed a change. Chairman Gordon Cairns has been working on selecting a new CEO since last year. And it seems he’s finally found the right man for the job.

New Woolies boss Brad Banducci definitely has his hands full with the job, but it seems people are behind him. Banducci reaffirmed it is the culture that needs changing first. Head staff need to get out into the shop floor to see for themselves what’s going on, Banducci told Fairfax Media.

The action in our business happens in the stores and the team in the office needs to understand that…we don’t learn things in the support office,’ Banducci said.

Despite almost making a net loss of $1 billion, Woolworths’ share price traded up 8.7% on Friday, and another 3.4% today.

Woolworths yahoo finance

Source: Yahoo Finance

Is the worst over for Woolworths?

Fund managers don’t believe the worst is over for the retailing giant. Ausbil Dexia’s head of equities, Paul Xiradis, says ‘the journey of recovery will be slow.’ Some other fund managers see Woolworths’ earnings actually declining going into 2017 and 2018. A recovery is not expected until three years from now.

However, this information is nothing new. Cairns warned on Friday that the recovery could take between three and five years. You really have to wonder if these fund managers are just trying to scare investors.

Yet Xiradis may be right. A turnaround in culture, on top of battling competition, may prove too much for the company in the limited time forecast. Earnings were weak on Friday across all divisions. And the outlook certainly looks challenging. But even fund managers might agree Banducci is certainly capable for the job.

Härje Ronngard,

Junior Analyst, Money Morning

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