Woolworths Group's supermarket sales growth of 1.5% in the March Q, starkly underperforming Coles ((COL)) on 5%. There are temporary factors for the divergence, Ord Minnett notes, including the timing of promotions and Coles' collectibles marketing.
With quarterly sales still tracking below the broker's expectations, forecasts are marginally lowered. Wage cost inflation and the cost of ramping up new distribution centres contribute the broker's forecast operating margin decline. Big W is also struggling.
Lighten and $27.50 target retained.
Sector: Food & Staples Retailing.
Target price is $27.50.Current Price is $30.75. Difference: ($3.25) - (brackets indicate current price is over target). If WOW meets the Ord Minnett target it will return approximately -12% (excluding dividends, fees and charges - negative figures indicate an expected loss).
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