Woolworths share price outlook: examining a data-focused future

Woolworths share price + Q3

For a company with a $54 billion market capitalisation, the Woolworths share price (ticker: WOW) has performed strongly over the last year, rising about 18% in that period.

This comes after the company posted strong third quarter sales results, recording total group sales of $16,566 million. While total sales growth was stagnant, growth from the company’s e-commerce operations again impressed, with eCommerce sales rising 64.2% to $1,341 million.

Brad Banducci, Woolworths CEO, is a man focused on the future. Illustrating this point, as part of the Q3 Mr Banducci said:

'Customer digital engagement remains a priority. Average weekly traffic to Woolworths' digital assets increased by 48% to 12.4 million visits per week. We made several improvements to our websites and apps to increase convenience for customers including enhancements to the Woolworths digital catalogue.'

Quantium top-up

On the front of expanding its digital focus, Woolworths has put its money where its mouth is so to speak, in April announcing it would bump up its shareholding of Quantium from 47% to 75%.

Quantium, for reference, is a data sciences and analytics company which helps Woolworths improv its decision making capabilities across pricing, ranging and promotions.

Speaking to the rapid growth that Quantium, when Woolworths purchased its initial 50% stake in 2013 for just $20 million.

The remaining 28% has proven to be considerably more pricey, with Woolworths paying $223 million to upsize its position. The transaction was completed on May 31.

Importantly, Quantium is now officially part of the Woolworths Group. While the company will continue to service its existing clients and be run by its current senior management team, a new business unit – Q-Retail – will be established with the aim of delivering on Woolworths data analytics ambitions.

Elsewhere, Woolworths CEO Brad Banducci will take on the role of Chairman on Quantium’s Board, while Amitabh Mall will act as the MD for Q-Retail.

Goldman Sachs analysts responded positively to these developments, recently reiterating their Buy rating and 12-month price target of $43.60 per share off the back of this upsized investment.

‘We believe this will satisfy internal demands on data lead management as well as leveraging data IP through revenues to external parties.’

‘We view this investment as a strategically aligned development in view of the increasing importance for data analytics and digital retailing in the industry.’

The $223 million purchase price means that Quantium has an implied value of ~$800 million, according to Goldman.

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