Woolies aiming for $1bn in online sales

The retail juggernaut has set its sights on cyberspace

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published November 22, 2012 1:26 pm AEDT

Diversified retailer, Woolworths Limited (ASX: WOW) is targeting $1 billion in online sales by the end of 2014.

The target has been set as part of its 'multi-option' retailing strategy, in which consumers will have multiple ways to interact with the company – online, in-store and via mobile apps. While $1 billion is fairly modest compared to last year's $55.5 billion in revenues last year, it's likely a significant jump in current revenues achieved online.

The strategy will be implemented across all its businesses, including Masters hardware stores, Dan Murphy's, BWS, Cellarmasters and Langtons bottleshops, hotels, discount store Big W and supermarkets and petrol stations. The company says that it is launching Australia's first home improvement online store as it rolls out Masters.

Woolworths is in fierce competition with Coles – owned by Wesfarmers Limited (ASX: WES), and Metcash Limited (ASX: MTS) – supplied IGA stores, in the supermarket space, whilst also taking on Wesfarmers-owned Bunnings hardware, with its new Masters stores. In fact, Woolies is also competing against Metcash's Mitre 10 stores in the hardware space, which is estimated to be a $35 billion market, thanks to Australia's obsession with DIY renovation.

Smaller players in the building fixtures sector like GWA International Ltd (ASX: GWA) and Reece Australia Limited (ASX: REH) are feeling the effects of the increased competition, as well as the worst housing and construction markets in 20 years, according to some industry players.

Woolworths has now opened 23 hardware stores of a planned 150 sites over five years and 112 sites are in the pipeline, with customers embracing its newer developments. More than 2 million customers have the Woolworths mobile phone app – the number has doubled since August, and 2.7 million apps in use across the group and growing by the hour.

The Foolish bottom line

Woolworths' target of $1 billion in sales across the group looks very likely to be achieved. The company also reaffirmed growth in revenues for the 2013 financial year of between 3% and 6%. Paying a fully franked dividend yield of over 4%, Woolworths could be a good addition as a core stock in your portfolio.

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Motley Fool writer/analyst Mike King owns shares in Woolworths. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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