Woolworths Limited (WOW) operates supermarkets, specialty and discount department stores, a liquor business and electronics stores throughout Australia.

The company manufactures processed foods, exports and wholesales food and offers petrol retailing. WOW’s hotel operations include pubs, food, accommodation, and gaming.

1Q13 Sales

WOW’s 1Q13 sales continued to show an improving sales trend. Sales from continuing operations were $14.8 billion for the quarter, up 4.7% on the prior corresponding period.

The supermarket division (including liquor), which accounts for ~88% of sales, reported a 3.4% rise in sales to $12.99 billion.

Areas growth

While a majority of WOW’s 1Q13 sales were good without being great, there were a few standout divisions. Big W reported like-for-like (LFL) sales growth of 3.4%, showing the success of the group’s recent marketing campaigns.

The group’s newly entered Masters Home Improvement segment showed spectacular growth, with 62.2% increase in sales. Most of this was driven from seven new store openings in one quarter and greater brand recognition.

The company plans to open 150 stores over the next five years, with at least 30 stores to be opened by the end of FY13. We believe that exposure to this sector can only be beneficial to WOW’s earnings in the long run.

Looking forward

A real solid sales trend has begun to emerge for WOW and 1Q13 sales may continue this positive trend. Another fact we like about the group is that such a large proportion of its sales come from the more reliable supermarket division, as this provides more consistent earnings.

WOW’s ability to generate cash will become increasingly important to fund the Masters Home Improvement expansion and we believe this will be beneficial to WOW going forward.

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Carsales.com Limited (CRZ) is an Australian business offering online access to automotive classifieds.

It is the largest consumer website in the country that covers automotive, plant machinery, motorcycle, caravan, marine and

display advertising.

Revenue is principally derived from online advertising, which includes dealer and private sales, and display adverting, where

corporate customers such as insurance companies place ads on CRZ’s website.

The group also has a data and research services division, which provides solutions to customers including importers, dealers

and industry bodies.

Industry leader

CRZ prospers even in uncertain economic times because it has been at the forefront of the continuing migration from print to online advertising.

Being proactive in identifying market trends has helped CRZ maintain leadership in its market.

Although the online advertising industry has low barriers to entry, CRZ’s trusted brand and new product offerings are key

reasons it has been able to stay ahead of the pack.

Reflecting this point, 75% of the time looking at auto ad websites was done on a carsales-owned site, this according to CRZ’s 1H12 results presentation.

1H12 earnings

CRZ’s 1H12 results continued a pattern of robust earnings and revenue growth.

For the most recent half, net profit rose 20% on-year to $27.6 million. Revenue was up a similarly healthy 22%.

CRZ declared an interim dividend of 11.3 cents per share, up from 9.4 cents in 1H11. Since FY07, half year net profit has increased at a compound annual growth rate of 40.6%, whilst revenue has grown at 28.9%.

Dealer revenue growth of 16% was delivered on the back of a steady increase in used vehicle enquiries and strong growth in new vehicle enquiries.

Private ad growth was up a more modest 7%, but with the release of new product initiatives throughout the half, coupled with a premium price rise in November, CRZ is well positioned for the second half.

Outlook

Following a buoyant first half, CRZ forecast a similarly strong second half.

The group maintains a dominant share of the online car ad market, and with new product initiatives lined up for 2012, is unlikely to relinquish its grip any time soon.

CRZ is cashed up, and with no debt, has the flexibility to pursue external growth opportunities and support its dividend. Whichmakes it a stock to watch in the future.

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Carsales.com Limited (ASX:CRZ) is an Australian business offering online access to automotive classifieds.

The company listed on the ASX at $3.92 in September 2009, up 12% from the $3.50 price at which the shares were issued.

Shortly after listing, CRZ was added to the S&P/ASX 200.

It is the largest consumer website in the country which covers automotive, plant machinery, motorcycle, caravan, marine and display advertising.

CRZ operates 23 individual websites which are all specifically focused on different products.

The company has been a fantastic growth story, benefitting from a migration to online advertising.

It has been one of the hot stocks since bottoming out at $3.79 earlier this month, having surged around 30% in the past few weeks.

Tough conditions, not for Carsales

Whilst most consumer sectors struggle in the face of tough economic conditions, CRZ has continued to prosper.

This is mainly because CRZ has been at the forefront of the continuing migration of advertisers from print to online.

Being proactive in identifying market trends has helped CRZ continue to be a clear leader in market share.

Surprisingly, there has been robust growth in new vehicle enquiry volumes despite decreased new vehicle stock availability.

CRZ recently acquired Jumbuck Entertainment’s OZtion assets which is one of the world’s leading developers of mobile phone applications.

FY earnings

CRZ reported a 30% jump in FY underlying earnings to $83.8 million with EBITDA margins at 55%.

Operating cashflow for the period climbed 19% to $60.1 million with operating revenue rising 26% to $152.5 million.

Earnings per share (EPS) increased by 34% to 25 cps while a final FY11 dividend of 10.5 cents per share was declared.

The majority of its revenue (47%) comes from the Dealer division and the Private division which accounts for approximately 20% of revenue.

The period saw continued strong growth in automotive enquiry volumes, up 15% on year.

Looking ahead

CRZ’s FY earnings were highly impressive, convincingly beating guidance. The company is looking to stay ahead of its competitors through the use of mobile devices.

Mobile now accounts for 13% of CRZ’s automotive traffic.

The acquisition of OZtion delivers CRZ a robust and proven e-commerce platform that will complement its growing general classifieds business.

CRZ has introduced significant new product releases with many planned for the coming months.

Its mobile application is expected to continue growing at a strong rate and will be a key area of ongoing focus.

Tough economic conditions remain a key challenge but we feel CRZ has enough upside potential to remain an outperformer, thus making it one of the stocks to watch.

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Carsales.com.au (CRZ) is Australia’s largest online automotive, motorcycle and marine classifieds business.

The company listed on the Australian share market in 2009.

Privately owned Nine Network has sold its 49% stake in carsales.com.au (CRZ).  Also CRZ announced the resignation of its non-executive directors.

The block trade was sold to a range of institutional and sophisticated investors at $4.92 per share.

Nine’s private equity owners, CVC Asia Pacific, said the sale proceeds would be used to cut $585 million in debt in order to prevent the need for an IPO of Nine.

CRZ slumped 4.6% on the day, making it one of the worst performers in the share market.

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