Woolworths Holdings Ltd. (WHL), a South African food and clothing retailer, fell in Johannesburg trading as analysts said a sales gain didn’t justify the stock’s “expensive” level.
The shares retreated as much as 3.1 percent to 51.28 rand, before closing 0.7 percent lower at 52.55 rand.
Sales for the 52 weeks through June 24 rose 12 percent from a year earlier, the Cape Town-based retailer said in a statement today. That would match the mean estimate of 12 analysts for sales to advance to 28.8 billion rand ($3.5 billion), according to data compiled by Bloomberg. Revenue last year climbed 9 percent to 25.8 billion rand, beating estimates.
“It’s an expensive stock and people are expecting growth,” Nic Norman-Smith, chief investment officer at Johannesburg-based Lentus Asset Management said by phone. “Even if you get a decent amount of growth, it’s not enough to justify the lofty valuations.”
Shares in the retailer have risen 35 percent this year, the second-best performance in the 10-member FTSE/JSE Africa General Retailers Index. (JGENR)
“The clothing retailers in particular are quite expensive, so maybe the market was a little bit disappointed,” Simon Fillmore, an analyst at Independent Securities (Pty) Ltd., said by phone from Johannesburg. “These shares are priced for perfection, so the market at worst expects them to meet expectations.”
The company trades at 21 times reported earnings, 50 percent higher than its five-year average. A forward price earnings ratio of 17 for 2013 is also “high” by historical standards, Fillmore said.
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