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Woolworths Ltd

The aim of the company is to grow its business by increasing its leadership in the area of food and liquor, maximize shareholder value, continue its record of building new businesses, while putting in place enabling factors in order to facilitate a new growth era (Woolworths Ltd 2013b). During the year ended June 30, 2013 the company expanded its operations through the addition of 32 hotels, 22 home improvement stores, 25 supermarkets in Australia and 6 in New Zealand (including a franchise), 14 petrol outlets, 15 Dan Murphy’s, 14 BWS and 6 BIG W (Woolworth Ltd 2013a). The company’s main competitor is Coles- a supermarket chain operated by Wesfarmers Ltd. Analysis of Financial Performance According to BPP (2009) return on capital employed (ROCE) is considered to be one of the most important ratios and so it is not possible to assess profitability without relating it to assets employed. Woolworths’ ROCE was unstable for the most part, declining from 25.58% in 2011 to 22.59 in 2012 and then increasing to 23.75% in 2013 (See Appendix 1 for calculations). A return of over 20% is considered good when compared to current interest rates. When compared with Wesfarmers Ltd ROCE is also better. In fact, Wesfarmers’ ROCE indicates instability, increasing from 10.07% in 2011 to 11.24% in 2012 and then declining to 10.92% in 2013 (See Appendix 1 for calculations). ...
Growth in Wesfarmers’ revenues were also much higher than Woolworths’ but similar declines over the period were evident. See Appendix 1 for details. Woolworths’ profit margin/earnings before interest and tax (EBIT) margin for the years 2013, 2012 and 2011 were 6.24, 6.11 and 6.05 respectively (See Woolworths Ltd Financial Summary on page 8 - Appendix 2). This indicates that Woolworths’ EBIT margin improved over the period. Woolworths’ EBIT margin compares favourably with Wesfarmers which increased from 5.88 in 2011 to 6.11 in 2012 but remained fairly stable in 2013 at 6.11 (See Appendix 1 for calculations). Earnings per share (EPS) - the earnings attributable to each share issued is found by dividing EBIT by the weighted average of the number of shares in issue. Woolworths’ EPS declined from $1.74 in 2011 to $1.48 in 2012 before increasing to $1.82 in 2013 (See Woolworths’ Income Statements for 2013 and 2012 on pages 11 and 15 - Appendix 2). The comparative EPS for Wesfarmers Limited shows EPS of $1.96 in 2013, $1.84 in 2012 and $1.66 in 2011 (See Wesfarmers’ Income Statements for 2013 and 2012 on pages 20 and 24 – Appendix 3). These figures indicate instability in Woolworths’ EPS and improvement in that for Wesfarmers’. Additionally, Wesfarmers EPS was higher for all three years. Analysis of Financial Position Statement An analysis of Woolworths’ financial position at year end 2011, 2012 and 2013 indicates that the group’s current ratio ranged between 0.79:1 and 0.91:1 over the period. (See Appendix 1 for details). While the ratio is improving, it suggests that the company is experiencing liquidity problems and may not be able to pay its debts as they fall due. The situation for Wesfarmers is a little better ...Show more


Woolworths Limited operates 1074 supermarkets in both Australia and New Zealand (Woolworths Ltd 2013a, p. 47). The company currently operates the largest chain of supermarkets in Australia where it currently has 872 stores (Woolworths Ltd 2013b)…
Author : fboehm
Woolworths Ltd
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