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BOOM: Why the Woolworths Limited share price soared 5% today

There would have been a few Woolworths Limited (ASX: WOW) investors biting their fingernails following a market sensitive announcement this morning, but it seems they needn’t have worried.

The retail giant’s shares have actually gained 4.9% to $23.54, after climbing as high as $23.64 shortly after the market opened.

Source: Yahoo! Finance

Source: Yahoo! Finance

The pop came after Woolworths updated investors on the review of its operating model. In short, it said it would reduce its workforce by another 500 members (with the support office and supply chain being the impacted areas), while it also said it expected to book a $766 million after tax charge when it delivers its full-year earnings results. You can read more about the update, here.

It seems the likely catalyst behind today’s gains could relate to comments from management which suggest the tough decisions it has been forced to make are putting the group back on track. It also said that there were “clear signs of progress in Australian supermarkets” which investors will take as a huge positive.

Although Woolworths shares have been stuck in a downwards trend since the beginning of the year, they have rebounded strongly this month. In fact, they have risen 12.7% so far in financial year 2017, outpacing both Wesfarmers Ltd (ASX: WES) – up 4.4% – and the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), which has risen 5.9% during the same time.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. 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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