Woolworths Holdings Limited

Analyst thesis

Our recommendation is based on: 

• Low valuations on a risk-adjusted basis, considering all three segments and the current consumer environment.
• We expect consumer foods to remain a strong performer, maintaining its margins, expanding volumes and increasing prices.
• Country Road Group (CRG) provides upside potential from a recovery in consumer spending with easing inflation and decreasing interest rates.
• We expect Fashion, Beauty and Home’s (FBH) turnaround to continue with full-priced sales being a large portion of its revenue.
• However, considering the upside, we highlight risks posed by the consumer environments in both clothing regions, namely South Africa and Australia. Consumers in these regions continue to face macro pressure as evident in CRG’s performance and FBH’s volume pressure. We anticipate the risks to be offset by the strength of the food business.