Why Shares of Woolworths Are Soaring Today

Credit: Woolworths

It’s been a glorious day for shareholders of Woolworths Limited (ASX: WOW).

While the market has trended slightly lower, Woolworths shares have gained 5% to $25.43. They did trade as much as 7.6% higher at $26.05 earlier.

It’s the highest price the shares have traded at since October last year (note that today’s price movement is not reflected in the chart below).

Source: ASX

There are a number of factors contributing to today’s rally.

No doubt the announcement to sell its Home Timber & Hardware business to Metcash Limited (ASX: MTS) yesterday is playing a role. Woolworths will also bring an end to its failed Masters venture which will provide some closure for those investors who have held on for the wild ride.

Read also how the Home Timber & Hardware business could help Metcash.

The second major factor boosting Woolworths’ share price appears to be its earnings report, released to the market this morning. Total group sales fell for the year, as did the group’s overall earnings, but there were indications that same-store-sales had recovered during the latest quarter.

Here’s what Woolworths’ CEO Brad Banducci had to say:

Sales improved over the year for our Australian Food business with comparable sales in the fourth quarter the strongest for the year driven by strong comparable transaction growth.

It’s clear there is still a lot of work to be done behind the scenes at Woolworths to improve its performance, and those issues aren’t going to be fixed overnight.

But there are at least signs that suggest management is making the right calls to turn the ship around, and investors will hopefully be rewarded for holding on in the long-run.

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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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