Supermarket retailer Woolworths Limited (ASX: WOW) will report its fully year results tomorrow, and it probably won't be pretty. The share price could swing either way, depending on how the market views the results.
The retailing giant's revenue engine is only firing on a few cylinders, with Home improvement brand Masters and discount variety store Big-W both struggling.
Newspaper reports suggest board and management changes could be in the works, but here's what you probably won't see…
- A sale of Masters or an announcement that Woolies is going to get out of the retail hardware sector. Masters only represents half of its home improvement offering – the other half – Home Hardware is profitable at an earnings before interest and tax (EBIT) level and generates similar revenues to Masters, something many investors seem to overlook.
- Likewise, a sale of Big-W or ditching the discount variety sector is unlikely.
- An announcement that the retailer is slashing its supermarket profit margins to compete more effectively with arch-rival Coles – owned by Wesfarmers Ltd (ASX: WES), ALDI, Costco and Metcash Limited's (ASX: MTS) IGA brand. Woolworths has some of the highest margins in the world for its supermarket products, but is losing market share – with Coles and Aldi seen as much cheaper.
- A spin-off of the supermarket division. Ok, that's highly unlikely.
- Overseas expansion. The reaction Woolworths management got last time it tried to bid for a Hong Kong supermarket chain should be evidence that shareholders will revolt.
What investors will be expecting is management commentary on how it's going to address the various issues it faces. That will likely include board changes, which are needed to fix the underlying issues Woolworths faces on many fronts.
