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Why is the Woolworths (WOW) share price in focus?

Posted: 20 May 2022 2:20 pm
News
WOW-shares-20May_1800x1000_Finder

The retailer's shares have been under pressure recently, dropping more than 12% over the last 6 months.

Shares in supermarket giant Woolworths (ASX: WOW) are among the most traded stocks on the ASX on Friday. Amid a tepid overall market and a poor record over the last few months, the WOW stock is up nearly 1.4% to $35.68 at the time of writing.

Why are investors cheering the Woolworths (WOW) stock price?

Some of the gains in Woolworths shares likely reflect a rebound in interest in retail stocks after a sell down in the previous session over fears that higher inflation and rising interest rates could affect their earnings.

Investors have a more clear eyed view of the outlook, reflected in shares in rival Coles (ASX: COL) also lifting by a more modest 0.6%.

But Woolworths shares are also in focus after the retail giant lobbed a $243 million takeover bid for ASX-listed MyDeal.com.au (ASX: MYD) in an effort to expand deeper into the online marketplace space.

Woolies is proposing to buy 80% of MyDeal for $1.05 a share, which represents a 63% premium over the target's last traded at 64.5c.

MyDeal is one of Australia's leading online marketplaces specialising in general merchandise such as furnishings, outdoor furniture and garden goods. It posted gross sales of $152.56 million for the first half of 2021, up 20%, while net loss nearly tripled to $6.9 million.

The platform hosts around 1,900 sellers and has more than 1 million active customers.

Growth hopes

Woolworths believes the MyDeal buyout will strengthen its marketplace capabilities and complement subsidiary BIG W's offerings.

"The addition of MyDeal to Woolworths Group represents a further step towards delivering a more holistic customer experience in food and everyday needs and materially expands our marketplace capabilities, especially in general merchandise," CEO Brad Banducci said in a statement.

The latest bid comes amid the evolving reshaping of the supermarket giant which last year demerged its liquor and pubs arm Endeavour, acquired a majority stake worth $500 million in food delivery business PFD, and has also invested in technology firms and start-ups.

Woolworths reported encouraging first-half results, ​​posting a net profit of $7.06 billion. It also managed to lift revenue by 8% thanks to a solid performance at its flagship supermarket business, although investors have been concerned about continuing cost pressures.

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