Perpetual is betting on a Woolworths turnaround

Marianna Massey/Getty Images for Woolworths

Perpetual Investments sees troubled supermarket player Woolworths as a buy with turnaround potential under its new management.

Sales are flatlining at Woolworths, well behind major competitor Coles with 5.9% sales growth, as the industry faces growing competition from new discount players including Aldi.

Woolworths posted a loss of $972.7 million in the first half of the financial year and food and liquor sales grew just 0.4% for the April quarter to hit $10.7 billion.

This month Woolworths appointed insider Brad Banducci, the former managing director of Woolworths Food Group, as CEO.

There have been reports that private equity has been kicking the tyres at Woolworths, mulling a takeover bid with a suppressed share price.

Woolworths shares have gone from $20.60 to more than $23 on the speculation but are still well below a 12-month high of $29.

Perpetual Investments says it’s increased its holding to more than 5% because it sees Australia’s largest retailer as turnaround potential.

“We are buying because we think (Banducci and chairman Gordon Cairns) are putting in place strategies to improve the execution in food and liquor, which has been sorely lacking for the last few years,” Perpetual Investments’ portfolio manager Vince Pezzullo told Fairfax Media.

Banducci, in the latest quarterly update, says it will be a three- to five-year journey to rebuild Woolworths supermarkets.

There’s more at Fairfax Media.

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