Woolworths Limited (WOW) will go ex dividend on 7/9/2009. The current dividend payment is 56 cents and it is 100% franked. The record date is 11/9/2009 and the dividend will be paid on 9/10/2009. Based on the full year payment the dividend yield is 3.6%.
Current Yield: 2.0% Franking: 100% DRP Discount: 0%
*Yield has been calculated on the closing price on the 4/9/2009. Current yield is based on the current dividend payment only.
Woolworths’ proposed new hardware business is expected to be profitable right from the start, according to its CEO.
With the already profitable Danks business and what he sees as a current lack of options for consumers, the business should be earnings positive when the first store opens its doors in 2011.
While it seems that in some metropolitan areas it’s hard to go one kilometre without hitting a Bunnings, apparently we are under-serviced when it comes to hardware stores. On the ABC’s Inside Business program yesterday, Woolies’ Chief Executive Michael Luscombe said there was one hardware store in the US for every 90,000 people, while in Australia we have one large format store for every 230,000.
ASX Code: WOW
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The Board of Woolworths Limited (WOW) has approved plans for the company to enter the $24 billion plus hardware sector with a multi format strategy designed to meet the everyday home improvement needs of Australian consumers. This fresh new home improvement offer will be based on a combination of significant local and international industry expertise; the right range representing value and choice; and a mix of convenient traditional hardware store formats and large destination home improvement stores to broaden consumer choice. Woolworths today announces a recommended takeover offer for Danks Holdings Limited (DKS), Australia’s second largest hardware distributor supplying 583 Home Timber & Hardware, Thrifty-Link Hardware, and Plants Plus Garden Centre stores plus 939 independent hardware stores. It also announced the development of a network of destination home improvement stores with a target to secure more than 150 store sites within the next five years and a joint venture equity agreement with leading US Home Improvement retailer Lowe’s Companies Inc.
Woolworths’ decision to enter the hardware and home improvement sector fits with the company’s overall offering which is focused on delivering value in customers’ everyday needs. The existing category for home improvement in Australia is under-serviced and Woolworths believes there is a genuine opportunity to bring competition and grow the sector with an enhanced offer.
Woolworths Chief Executive Michael Luscombe said: “There is a real opportunity to increase the overall size of the sector and this significant new distribution and retail investment should be positive for both customers and the industry alike.” Category expansion is one of Woolworths’ stated platforms for future growth. Expansion into the hardware and home improvement sector is a logical extension of Woolworths’ existing retail capabilities, technology and skills. We’re interested in adding choice to the industry and we believe we can improve the pricing, product range and experience for customers,” said Mr Luscombe. Through successful category expansion in the past, Woolworths is now proudly represented in consumer electronics, liquor, and hotels and has also entered financial services with the Woolworths Everyday Money credit card. The opportunity to grow the business by entering new categories benefits Woolworths shareholders by diversifying revenue streams and providing access to a new demographic of customers through which to grow the business and enhance shareholder value.
Woolworths/Lowe’s have offered $13.50 per share (representing total equity consideration of $87.6 million), plus approved final Danks declared dividend of $0.53 per share to acquire all the ordinary shares of Danks, Australia’s second largest hardware distributor. “The acquisition of Danks gives us immediate capacity and capability and fits with our overall aim of serving our customers’ everyday needs,” Mr Luscombe said. “Danks is a profitable, well run business that provides competition and choice in the independent hardware sector at both a retail and trade level. Danks is the ideal partner for Woolworths and we believe the combination of industry expertise on the Danks side, with Woolworths’ access to capital and supply chain systems, will significantly benefit the independent retailers and their offer.
Danks is a successful distributor to more than 1500 independent retailers, of whom 583 are branded either Home Timber & Hardware (205), Thrifty Link (312) or Plants Plus Garden Centres (66). Woolworths believes there is a clear opportunity to grow the distribution business and deliver greater efficiencies to independent retailers. Supporting independent retailers will continue to be a key priority for Danks. The acquisition of Danks will have a positive EBIT and EPS contribution from day one and gives Woolworths immediate capacity and capability to operate and grow its hardware business at a distributor and retail level. Woolworths believes there will be significant synergies between the businesses.
Woolies is set to take on Wesfarmers’ Bunnings chain for a chunk of the $24 billion home improvement market.
In a joint equity agreement with US retailer Lowe’s Companies, Woolworths has made a takeover offer for Danks Holdings, Australia’s second-largest hardware retailer.
The board of Danks has unanimously recommended the offer to its shareholders.
The proposal offers $13.50 per Danks share, which yesterday closed at $8.20, and there will be a 53 cent dividend per share.
Danks currently supplies and markets to 583 Home Timber & Hardware, Thrifty-Link Hardware, and Plants Plus Garden Centre stores and to a further 939 independent retailers. In its announcement this morning, Woolies said it intends to secure 150 new sites within 5 years.
Under the joint venture, Lowe’s will own one third of the new chain.
ASX Code: WOW
ASX Code: DKS
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Discount department stores are emerging as winners from the GFC, as shoppers seek out cheaper shopping alternatives and look for better value when spending their government stimulus package payments.
Wesfarmers is seeing the benefits in their Kmart and Target sales figures, which are outperforming the more upmarket stores like Myer and David Jones. Woolworths Big W stores have also seen positive growth in the last quarter.
The trend is also being seen in the US, where Wal-Mart has reported a growing proportion of its demographic are shoppers on higher incomes, and 17% of the recent growth in store traffic is coming from new customers. The Wal-Mart chief believes the economic downturn has brought about a favourable change in consumer attitudes to discount stores, and in the types of products they are likely to buy.
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Woolworths announced an increase in sales of 8.8% to $26.1 billion with a corresponding increase in net profit after tax of 10.3% to $983.3 million. The dividend will also be increased by 9.1% to 48 cents per share. Despite all this the share price dropped on Friday.
Michael Luscombe, CEO said “This is a strong result reflecting increasing customer acceptance of our retail offer underpinned by the continued investment in all our businesses. I am confident that we are well positioned to take advantage of growth opportunities as they arise and to meet future challenges. Woolworths has invested almost $1 billion of capital in this half year to add new stores, improve existing stores, add services, deliver value and create an even better shopping experience for our customers.
We created 9,000 jobs in the half year and expect to create another 7,000 jobs in the second half. We continue to refine and improve all our brands to meet customer expectations that change over time and to seek new opportunities to continue the positive momentum in our business. Our balance sheet, debt profile and the strength of our credit ratings ensure we are very well positioned in the current environment”.
http://www.woolworthslimited.com.au/phoenix.zhtml?c=144044&p=homepage
Woolworths is thought to be well advanced with a plan to set up a big-box hardware retail business, challenging Wesfarmer s dominant Bunnings chains.
An article in The Australian argues the move is a smart one for Woolworths, as the market offers hefty margins and is ripe for a new entrant . The article also suggests Woolies has been looking into Reece Australia.
Earlier plans to merge with Mitre 10, which currently has the second largest share of the $38 billion market, have been abandoned.
Woolies has also recently bought Langton s Fine Wines Auctions, an upmarket online wine business which it says will complement its existing liquor retail business led by Dan Murphy s.
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