The Woolworths Group Ltd (ASX: WOW) share price is defying the market weakness on Wednesday and is pushing higher.
In morning trade, the retail giant's shares are up almost 3% to $37.72.
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Why is the Woolworths share price pushing higher?
Investors have been bidding the Woolworths share price higher this morning after the company's half-year results came in ahead of expectations.
For the six months ended 31 December, Woolworths reported a 4% increase in sales to $33,169 million and an 18.4% lift in earnings before interest and tax (EBIT) to $1,637 million.
This was underpinned by sales growth across the Australian Food, Big W, Metro Food, and Australian B2B segments, as well as the non-recurrence of direct COVID costs totalling $239 million.
This ultimately allowed Woolworths to lift its interim dividend by 17.9% to a fully franked 46 cents per share.
Also potentially boosting the Woolworths share price has been its strong start to the second half. For the first seven weeks of the half, Australian Food sales are up 6.5%, New Zealand Food sales are up 6.3%, and Big W sales are up 9.7%.
Broker reaction
Goldman Sachs, which had tipped Woolworths to positively surprise with its earnings, commented:
WOW reported 1H23 results with group sales A$33.2B +4.0% in-line with GSe and Group EBIT of A$1.64B +18.5% YoY and +7% vs GSe. Income tax expense was slightly higher than anticipated leading to Group Underlying NPAT of A$907mn, +14% YoY and +2% vs GSe.
All in all, the broker was pleased with the result and remains positive on the future. Though, it is keen to see how the company responds to rival Coles Group Ltd (ASX: COL) stepping up its competition. It said:
The margin outcome for Australia Supermarket and the better than expected run-rate in 2H23 first 7 weeks is the bright spot though we will need to understand the execution strategy to maintain/continue to gain market share in the face of COL stepping up competition more aggressively with greater focus on value and also supply chain upgrades to come. GPM expansion opportunity into 2H23 (which is largely unimpacted by COVID cost reduction) would also be key to understand flow-through to EBIT margin sustainability as COVID cost savings reduce as a positive catalyst in 2H23 and FY24.
The broker concludes by reiterated its buy rating (and $41.20 price target). It said:
Overall we continue to believe that the more advantaged omni-channel execution capability of WOW will continue to drive longer term market share gains and cost efficiencies for EBIT margin expansion. Reiterate Buy.
