Over the years despite weak growth in wages, the growth in household credit and the strong housing market has led the consumers to spend. Also, a positive CAGR is expected to be seen by Australian retailing sectors until 2023. Three retail sector stocks, out of which two (WOW and COL) comes under defensive category stocks and one is moving towards it, are discussed as follows:
WOOLWORTHS GROUP LIMITED (ASX: WOW) – Since June 2016, Woolworths as a place to shop has increased by +15. The company had a revenue change of positive 3.4% to $56.7b, and the EBIT increased by +9.5% to $2,548 million. The company achieved an exciting return on fund employed with a 188bps increase to 24.1%. The group’s dividend per share also increased by 22.6% to reach 103c. The company received an online growth over 30% following investment in AU and NZ Food and investment in New Zealand food is driving improved customer and sales outcomes. The company has a decent P/E of 22.040 and EPS of 1.326 AUD as compared to peer basket. The stock price went down by 1.676% to $28.740. The stock witnessed an 8.78% surge in the performance in the past 12 months.
COLES GROUP LIMITED (ASX: COL) – The company remains the biggest competitor of Woolworths. The company has been given a positive and stable outlook from public credit ratings of BBB+ from Standard & Poors and Baa1 from Moody’s. These ratings are driven by Coles’ strong balance sheet, market-leading position in growing and resilient markets and attractive cash generation characteristics. The company also lately performed an arrangement for the demerger of Coles Group Limited from Wesfarmers and the number of Coles fully paid ordinary shares on issue is 1,333,929,696. To support the strategic and operational objectives, Coles has a strong balance sheet which will provide funding capacity. The stock price went down by 0.873% to $12.490. The stock witnessed an 8.43% surge in the performance in the past one week.
MYER HOLDINGS LIMITED (ASX: MYR) – The speculation is that Noni B is close to overtaking Myer. The company has however appointed a new CEO, John King, and made a significant number of appointments in management. With a focus on enhancing product quality across the company, it has announced that all clearance floors will close in calendar 2019. Company’s total sales declined by 3.2% to $3.1 billion and were down 2.7% on a comparable store’s basis, but total online sales reached $239.4 million. The operating gross profit margin increased to 38.2% while gross operating profit declined by 2.9% to $1.2 billion which is not a positive sign. However, the first quarter online sales of FY19 grew by 3.6%. The stock price went down by 2.5% to $0.390 which is close to its 52-week low. The stock witnessed a 48.05% decline in performance in the past 12 months.
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