Business Analysis and Valuation of Woolworths Group Limited

BUSINESS ANALYSIS AND VALUATION
Business Analysis and Valuation
A case on Woolworths Group Limited

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BUSINESS ANALYSIS AND VALUATION
Executive Summary
The report attempts business analysis and valuation of Woolworths Group, one of the leading
food retail companies in Australia. Based on analysis and valuation, recommendation is
provided to prospective investors.
The report starts with an overview of the company’s position in the industry along with
mission and goals pursued by the company and strategies formulated to achieve those goals
in FY18. Highlights on Management team are provided for gauging the competence of
management team. Overview of products and segment information is also provided.
The report continues with a Michael Porter’s 5 forces model analysis to evaluate the intensity
of peer rivalry prevalent in the food retail industry. The accounting policy issues of operating
leases and goodwill impairment have been considered for close monitoring in future reports.
Analysis of financial performance and financial position for FY18 and comparison with
FY17 have been done as a prerequisite for valuation purpose. DCF methodology has been
used to value the company and make recommendation based on stock price as of 17th May,
2019.

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BUSINESS ANALYSIS AND VALUATION
Table of Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................4
Company Mission and Goal.......................................................................................................4
Managerial Highlights................................................................................................................5
Product Overview and Segment information.............................................................................6
Michael Porter’s Five Forces Model..........................................................................................7
Low threat of new entrants.....................................................................................................7
Bargaining Power of suppliers...............................................................................................7
Bargaining Power of buyers...................................................................................................7
Threat of substitutes...............................................................................................................8
Competitive Rivalry...............................................................................................................8
Accounting Policy choices to be checked..................................................................................9
Evaluating Financial Performance...........................................................................................10
Evaluating Financial Position..................................................................................................11
Recommendation to Investors..................................................................................................13
Conclusion...............................................................................................................................14
References................................................................................................................................15

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BUSINESS ANALYSIS AND VALUATION
Introduction
Established in 1924, Woolworths Group Limited (ASX: WOW) is a renowned name in the
Australian food and staples retailing sector (ASX, 2019). As of FY18 end, the company has a
network of 3,240 stores across Australia and New Zealand with revenue grossing A$56
billion (Woolworths, 2018). The company serves more than 29 million customers per week
with the help of a team of 201k employees and has strong alliance with several local farmers
and manufacturers. Woolworths is a leading player in the Australian grocery retailing sector
with a sizeable market share of around 34%.
Figure 1
Company Mission and Goal
Woolworths’ mission is to “deliver the best in convenience, value and quality for our
customers” (Woolworths, 2019). Leadership is pursuing the goal to “have customers put the
company 1st across all brands” (Woolworths, 2019)
The company focuses on six priorities to pursue its goal.
-Building retail team which pursues an organisational culture of customer 1st and team 1st -
Success in operations is measured based on Voice of Customer (VOC), Voice of Team