An Introduction on the Financial Analysis of Woolworths (Essay Sample)

A FINANCIAL ANALYSIS ON WOOLWORTHS
By Students name
Finance
Tutor: …………………...
University of…………….
Department of…………..
6th May 2016
Introduction
The retail industry in Australia is very concentrated, with over 140,000 retail stores and businesses fighting for market share. Even though its flooded, the Australian retail industry is one of the strongest in the world with retail chains like Woolworths and Cole being a strong part of it (Wardle and Baranovic, 2009). Woolworths is a global brand on its own right and currently dominates close to 80% of the Australian and New Zealand market together with Coles.
The multinational company was founded in 1924 at a tiny basement store in the city of Sydney, Australia at the Imperial Arcade. In less than 6 years, the company had expanded into New Zealand and boosted of 16 stores as at 1930. The company quickly took advantage of its growth potential and complemented its newspapers’ advertisements with radio ads. It rapidly expanded and started offering its employees a retirement assurance scheme which was quickly followed by an establishment of its first warehouse in 1939. To spur its growth, the company acquired stores like SafeWays, and Dick Smith which deals in electronics plus also ventured into discount stores.
In 1989 Woolworth was compulsorily acquired by IEL at an offer of $3.65 per share and was delisted from the stock exchange after a stint of 65 years. No sooner after being compulsorily acquired than the company re-listed in the Australian Stock Exchange with the biggest share float in Australia’s history, in 1993. Its present Earnings per share are $1.70 with a dividend payout of 139cents for the year ended 2015, a jump of 1.5% from the previous year (Financials.morningstar.com, 2016).
The company continued in its strategic acquisition path and in 2004 they took over Australian Leisure and Hospitality(ALH) which gave them a foothold in the liquor and hospitality business. It ventured into the American market and went into a joint venture with Lowe, the second largest American home improvement business. It also acquired the Danks Group, a hardware firm at a cost of $13.50 per share. This gave them a footing into a sector that generates $24billion in revenue yearly (Greenblat, 2009). As of today the retail giant offers a wide range of products including liquor, electronics, general merchandize, fuel and fresh foodstuffs.
At present, Woolworths is the second largest employer in Australia with over 190,000 people on its payroll amounting to approximately 1.5% of the total population (Woolworths Online, 2016). The supermarket also boasts of 872 supermarkets in Australia and 156 in New Zealand. It has expanded into other territories including South Africa, United Arab Emirates and India although its expansion into the Asian markets is at a limited pace (Woolworthslimited.com.au, 2015). The multinational reported a $ 60.7Billion amount in sales for the year ended 2015, lower by 0.2% from the previous year. It serves approximately 17 million shoppers on a daily basis (Woolworth Annual Report, 2015). In the year 2012 it received an award for being the top brand by Interactive media with a brand value of $4,203 million with a 5% alteration of the value compared to the year before. The company is headquartered at Bella Vista, New South Wales in Australia (Shape Your World, 2015). The company reported an Earnings before Interest and Tax (EBIT) of $ 3,784 million a decrease of 0.7% from the previous year. Nevertheless, its net profit jumped by 0.1% to $2,433 mil...