Business SummaryWoolworths (WOW) is a retail operator in Australia and New Zealand, with3,357 stores and approximately 215,000 employees. Its business divisioncomprises of Australian Food, New Zealand Food and Big W.

Australian Food: This division is involved in procurement of food and relatedproducts for resale and provision of services to customers in Australia. Thisdivision is divided in three sections woolsworth supermarkets, Everydayreward, and Financial services and insurance. This section includesSupermarket chain operating 995 stores across Australia, WoolworthsRewards loyalty program and financial products tailored to Woolworthscustomers.

New Zealand Food: This division is involved in procurement of food anddrinks for resale to customers in New Zealand. This division own 181Countdown stores and has over 18,000 team members and more than20,000 product lines.

Big W: Big W brand is involved in procurement of discount generalmerchandise products for resale to customers in Australia. As of now theyhave network of 183 stores nationally. BIG W is partnered with Good360 tohelp deliver brand new items to families in need.

Restructuring: On 2 February 2020, Woolworths Drinks business wasrestructured to create Endeavour Group. On 4 February 2020 EndeavourGroup merged with ALH Group. Woolworths Group owns 85.4% ofEndeavour Group.

Latest ResearchCOVID impacts limit operating leverage in 1H22e

Woolworths provided a 1H22e trading update, with significantly lower EBIT

guidance for Australian Food and BIG W catching the market by surprise.The main driver was higher indirect COVID costs relating to Woolworthsoperating under an uncertain trading environment. We reduce our earningsby 10% in FY22e, ~3.5% in FY23e and ~2% in FY24e as we see most ofthe earnings impact being short term in nature and will likely fade asmanagement addresses controllable issues and COVID subsides. Ourtarget

price is down 1.3% to $39.00 and we maintain our Neutral rating.

For more information see research 15 Dec 2021.

GICS - Food/Staples

Woolworths Group Limited

ASX Code: WOW Price: $34.41 12 Mth Target Price: $39.00 Rating: Neutral

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Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

27 January 2022$41,704m1,212.0m$42.66$33.84

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Neutral$39.0013.3%4.3%17.6%

Investment FundamentalsFYE 30 Jun 2021A 2022F 2023F 2024F

Profit $m 1,972.0 1,481.0 1,705.0 1,839.0Profit (norm)* $m 1,972.0 1,481.0 1,705.0 1,839.0

EPS* ¢ 156.0 120.0 139.0 150.0EPS Growth % 22.8 -23.1 15.8 7.9P/E* x 22.1 28.7 24.8 22.9P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 108.0 90.0 103.0 111.0Yield % 3.1 2.6 3.0 3.2Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2017A 2018A 2019A 2020A 2021A

Sales Revenue 55,669 56,726 59,984 63,675 55,694Total Revenue ex. Int. 55,913 57,187 60,272 63,850 55,811EBITDA 3,340 3,651 3,946 5,677 5,372Depreciation & Amort. -1,014 -1,103 -1,222 -2,458 -2,608Goodwill Amortisation -- -- -- -- --EBIT 2,326 2,548 2,724 3,219 2,764Net Interest -194 -154 -126 -843 -613Profit Before Tax 2,132 2,394 2,598 2,376 2,151Income Tax -650 -718 -780 -730 -647Outside Equity Int. -60 -71 -66 -44 -65Profit after Tax 1,534 1,724 2,952 1,602 1,972Significant Items after Tax -- -- -259 -437 102Reported Profit after Tax 1,534 1,724 2,693 1,165 2,074Preferred Dividends -- -- -- -- --

Cash Flow ($M)2017A 2018A 2019A 2020A 2021A

Receipts from Customers 65,499 66,899 68,998 68,898 72,688Funds from Operations 4,024 3,775 3,858 6,067 6,162Net Operating Cashflow 3,122 2,930 2,948 4,561 4,624Capex -1,910 -1,848 -1,991 -2,149 -2,389Acquisitions & Investments -6 -38 -80 -91 -244Sale of Invest. & Subsid. 201 287 1,682 34 19Net Investing Cashflow -1,431 -1,510 -246 -1,945 -2,200Proceeds from Issues 56 -- -- -- --Dividends Paid -562 -780 -1,318 -1,199 -1,154Net Financing Cashflow -1,729 -1,060 -2,917 -1,612 -3,043Net Increase Cash -39 360 -215 1,004 -619Cash at Beginning 956 917 1,277 1,066 2,068Exchange Rate Adjust. -1 -- 4 -2 -3Cash at End 917 1,277 1,066 2,068 1,446

Ratios and Substantial Shareholders2017A 2018A 2019A 2020A 2021A

Profitability RatiosEBITDA Margin % 6.00 6.44 6.58 8.92 9.65EBIT Margin % 4.18 4.49 4.54 5.06 4.96Net Profit Margin % 2.55 2.83 2.92 2.52 2.58Return on Equity % 14.93 15.31 17.03 18.33 104.35Return on Assets % 6.90 7.39 7.96 5.74 4.81

Debt/Safety RatiosNet Debt/Equity % 21.48 14.10 19.34 183.69 798.10Interest Cover x 12.01 16.55 21.62 3.82 4.51

Top 5 Substantial ShareholdersBlackRock Group 6.4%State Street Corporation and subsidiaries 5.1%

Balance Sheet ($M)2017A 2018A 2019A 2020A 2021A

Cash & Equivalent 909 1,273 1,066 2,068 1,009Receivables 410 420 470 548 480Inventories 4,080 4,233 4,280 4,434 3,132Other Current Assets 350 434 257 742 206Current Assets 6,994 7,181 6,298 8,125 15,786Prop. Plant & Equipment 8,438 9,026 9,519 20,804 17,030Intangibles 6,533 6,465 6,526 7,717 4,671Other Non-Current Assets 422 527 402 911 342Non-Current Assets 15,922 16,377 17,193 30,347 23,450Total Assets 22,916 23,558 23,491 38,472 39,236Interest Bearing Debt 3,030 2,803 3,129 18,659 14,888Other Liabilities 10,009 9,906 9,693 10,781 22,609Total Liabilities 13,040 12,709 12,822 29,440 37,497Net Assets 9,876 10,849 10,669 9,032 1,739Share Capital 5,615 6,055 5,828 6,022 5,253Reserves 114 353 490 391 -6,989Retained Earnings 3,797 4,073 3,968 2,329 3,115Outside Equity Int. 350 368 383 290 360Total Shareholders Equity 9,876 10,849 10,669 9,032 1,739

Current Analyst Recommendations *

This chart shows the spread of recommendations from those broker analyst's inAustralia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Katrina EastoeMs Michelle Hall

Directors

Mr Philip Wayne Chronican(Non-Executive Director)Mr Gordon McK Cairns(Non-Executive Chairman,Non-ExecutiveDirector)Mr Scott Perkins(Non-Executive Director)Ms Siobhan Louise McKenna(Non-Executive Director)Ms Maxine Nicole Brenner(Non-Executive Director)Mr Bradford Leon Banducci(Chief Executive Officer,ManagingDirector)Ms Holly Suzanna Kramer(Non-Executive Director)Ms Kathryn (Kathee) Tesija(Non-Executive Director)Ms Jennifer Carr-Smith(Non-Executive Director)

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Woolworths Group Limited

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