Why the Woolworths Limited share price just popped 7%

The Woolworths Limited (ASX: WOW) share price popped 7% this morning following a key announcement regarding its Home Improvement business.

Source: Google Finance

Source: Google Finance

In an announcement to the ASX, Woolworths said it’ll buy out US-based Lowe’s, its joint venture partner, to acquire the entire Home Improvement business before selling it.

Woolworths has invested $2.8 billion in the Home Improvement business, which includes the Masters and Home Timber & Hardware brands, over the past four years. However, it is loss making, and pressure has mounted from shareholders to cut its losses. Recently appointed Chairman, Gordon Cairns, said, “Our recent review of operating performance indicates it will take many years for Masters to become profitable.”

With shares trading firmly higher – clearly – the myopic and irrational marketplace is cheering the company’s intention to cut its losses.

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Motley Fool writer/analyst Owen Raszkiewicz has a financial interest in Woolworths. Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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