Morning Report Wednesday 5 November 2014
** Commonwealth Bank (CBA) posts a $2.3B quarterly profit**
Woolworths plummets, do we catch the falling knife?
As I sit down bright and early at the desk, whilst some are still recovering from their winnings and losses, courtesy of yesterday’s Melbourne Cup, we revisit Australia’s largest supermarket chains after Woolworths (WOW) recent plunge. Woolworths (WOW) has fallen -7.5% since reporting disappointing 1Q sales for the financial year of 2015 last Monday, as the “discount war” continues, and 15% from the highs of 2014. As mentioned in the previous morning report, from a risk/reward basis, we have been negative large Australian supermarket chains, targeting Woolworths to at least the low $30 region. However, the rumour of Wesfarmers (WES) taking over AMP and moving into financial services has aided a 10% rally in Woolworth's main competitor. Wesfarmers has implemented the Bunning's chain brilliantly and Woolworths are losing millions trying their version with Masters, are Wesfarmers going to get a significant jump on their rivals again by moving into financial services first? I have been negative the local sector, especially when I cast an eye over to the UK supermarkets that have been hammered by discount chains who are currently arriving on our shores and this strong factor still has me very wary the sector.
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