Given the rapidly deteriorating earnings outlook, the WOW Board has provided 1H16 NPAT guidance of $0.9-1b (UBSe $1.125b, consensus $1.197b) which implies 16-25% 1H16 consensus downgrades. This has been primarily driven by an acceleration of investment (price & labour) while also absorbing significant cost inflation (e.g. meat). It appears to us that the Board and current management are not waiting for the new Group CEO to arrive. They have to move now, or risk a more difficult re-base down the track, given key rivals Coles and Aldi will not stand still. The outlook for struggling Masters remains unclear with the current MD sounding less than committed.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
