Already a subscriber?Woolworths’ high return on equity has been skewed by the $12 billion spin-off of its liquor retailing and hotels business Endeavour and the depressed value of its supermarket sites on the balance sheet, MST Marquee brokers say.
It is not hard to see why. According to analysis by MST Marquee’s Craig Woolford, the local giants have a significantly higher return on equity compared with supermarkets overseas.Walmart in the United States and Canada’s Loblaws are both below 20 per cent; Tesco and Carrefour, from the United Kingdom and France, are below 15 per cent.
“In the case of Endeavour, lots of the acquisitions were done 20 odd years ago,” Mr Woolford wrote in a note after the parliamentary hearing. “And Endeavour was demerged at market value, which means you’re taking equity out at a much higher price and reducing in the calculation, this lifts return on equity.”
“Woolworths’ property, plant and equipment at cost was $17.6 billion. After accumulated depreciation for FY23 it was on the books at $8.9 billion,” he said. “Good luck to her if she fooled the politicians,” said Professor Taylor. “When you have a long-term lease commitment, you record it as a liability which is the present value of the lease payments, and you also capitalise it as an asset on the future lease commitments.”
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