205321153 Woolworths PAST JOB 1

Topics: Revenue, Financial ratio, Financial ratios Pages: 33 (6922 words) Published: May 14, 2015

University of Technology Sydney
Graduate School of Business
Group Assignment

Report to:

Case Study: Woolworths

Prepared by:
Student Name
Student Identification
Peter HOWE
Christian ORITZ
Zhiming YE

ASSIGNMENT DUE 21 October 2009

Table of Contents
Woolworths Limited: Case Study3
Executive Summary3
Restating Financial Statements3
Industry and Business Strategy Analysis4
1. Industry Analysis4
2. Business Strategy Analysis5
Accounting and Financial Analysis6
Measuring overall profitability6
Assessing Operational Management7
Woolworths Limited Profit and Loss and Balance Sheet Forecast – 2009 to 20148 Profit and Loss8
Balance Sheet9
Sensitivity Analysis11
Assumption 111
Assumption 211

Woolworths Limited: Case Study

Executive Summary

Woolworths Limited is a diversified retailer with principal operations in Australia and New Zealand. The company is recognised as one of the top five retailers in the world with major brands in Australia that includes Woolworths and Safeway supermarkets, Woolworths and Safeway Liquor, Caltex/Woolworths Petrol, Dick Smith Electronics, Powerhouse, Tandy, BWS, Dan Murphy's and BIG W. The company has successfully leveraged its economies of scale to dominate and gain a competitive edge over its rivals in Australia and has consistently recorded double-digit sales revenue and a stable ROE to its shareholders.

To continue this impressive momentum of sales growth, Woolworths has embarked on entering the hardware market in Australia, it has recently entered the organic food market by acquiring the well-known “Macro” organic brand and plans to expand its operations in emerging markets like India. However, it also faces more intense competition from its rivals Coles, IGA, Aldi and other smaller boutique food retailers. It must also weather the macro-economic factors like rising interest rates, fuel prices and employment uncertainty that directly affect consumer confidence and spending. These key challenges do pose a genuine threat for Woolworths to sustain its competitive edge.

The purpose of this case study is to provide a comprehensive analysis and valuation of Woolworths. We have conducted a thorough review of its business operations, the industry it participates, performing key ratio and sensitivity analysis and applying the relevant forecasting and valuation models in order to formulate an opinion on whether it is able to sustain this growth and recommend whether it is a buy, hold or sell stock to investors.

Restating Financial Statements

Woolworths Limited is the largest retail company in Australia by market capitalisation and sales, which consist of food, liquor, petrol, consumer electronic products and general merchandise, with over 75% of group sales and EBIT, coming from the sale of food and liquor. The key success factors for Woolworths Limited are to maintain its market leadership as well as continuing to invest in new stores across both geographical and key demographical growth areas to deliver sustainable profits well into the future.

In order to evaluate effectively the degree to which Woolworths accounting captures the organisations underlying business performance there is a need to analyse the financial statements including the profit and loss, balance sheet and cash flow. In order to facilitate this analysis it is necessary to restate the profit and loss and the balance sheet to ensure consistency of classification and format which if not kept consistent year on year can make it difficult to compare performance over an extended period of time.

The analysis involves looking for any distortions or inconsistencies in Woolworth’s financial information that may have an...

References: BARROWCLOUGH, Anne.  (2009, March 5). Australian GDP slips. The Times,51.  Retrieved October 2, 2009, from ProQuest Newsstand. (Document ID: 1655793951).
Business Monitor International, Australia Food and Drink Report - Q4 2009. (2009, October). Australia Food and Drink Report, p.65, Retrieved October 2, 2009, from ABI/INFORM Trade & Industry. (Document ID: 1864724811).
Datamonitor, 2009. "DATAMONITOR: Woolworths Limited." Woolworths, Ltd. SWOT Analysis, page 4, Business Source Premier, EBSCOhost (accessed October 2, 2009).
Datamonitor, 2009. "DATAMONITOR: Woolworths Limited." Woolworths, Ltd. SWOT Analysis, pp. 5-6, Business Source Premier, EBSCOhost (accessed October 2, 2009).
Weekend Australian (Australia), 26 September, 2009, Blair Speedy, p. 27, Finance Section
Wesfarmers (2008), Wesfarmers Annual Report 2008, http://thomson.mobular.net/thomson/7/2802/3518/ - accessed 21st October 2009
(WOW (2006, 2007, 2009))
Appendix 1: Woolworths Limited’s reformatted financials for the period 2006 to 2008 – Balance Sheet
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