Woolworths has announced the closure of 30 Big W stores and two distribution centres after the completion of its petrol sale. The company will also undertake a $1.7bn off-market share buyback.
Macquarie believes this removes potential uncertainty from Big W and the structure of the buyback is also attractive. The broker finds the payback on the store closures is uncertain as they will occur in FY21/22.
The broker is unclear on the operating leverage in the food/drinks business and retains an Underperform rating. Target is raised to $26.84 from $26.26.
Sector: Food & Staples Retailing.
Target price is $26.84.Current Price is $31.19. Difference: ($4.35) – (brackets indicate current price is over target). If WOW meets the Macquarie target it will return approximately -16% (excluding dividends, fees and charges – negative figures indicate an expected loss).
