Financial Analysis of Woolworths Ltd Essay

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Pages: 13

Financial Analysis of Woolworths Limited

10 October 2011

By: Huatong (Claire) Liu

To: Potential investors

Executive Summary

The primary purpose of this report is to determine whether Woolworths Limited is an appropriate and profitable company to invest in. Specific objectives include analysis of annual reports of Woolworths and its competitors (Wesfarmers) as well as interpretation of relevant government and industry statistics, stock exchange, market information and media comments. Further, Woolworths’s financial strengths and weaknesses are identified. The potential growth prospects for Woolworths, the future of the food and staples retailing industry, and the risks versus the benefits of investing in Woolworths are all
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We come to the conclusion based on two major points. The first is that both trend analysis and common-size statements reveal little improvement in financial outcome for the last three years. Similar outcome applied to Wesfarmers. The second major reason is that ratio analysis shows that

As such we recommend that the class sell its 600 share position in the company and search for alternative investments. did not yield results that would be necessary to continue to hold the shares. In the pessimistic and probable outlooks the present value of the future share price was much lower than the current market price

Looking ahead Woolworths still remain confident and will expand in the pace of 15 – 25 new supermarkets and 3 – 5 new supermarkets per annum in Australia and New Zealand respectively[2]. The sector of petrol will grow supporting the Supermarket rollout strategy.

Financial Analysis

Woolworths reported sales up 4.7% to $54,143 million for the financial year ended 26 June 2011. 5.1% increase in net profit after tax to $2,124 million (6.4% excluding natural disaster costs). EBIT increased by 6.3% to $3276.4 million.