Woolworths Research

WHL Australia – Joined at the hip

We believe WHL’s Australian divisions have become increasingly intertwined as evidenced by CRG increasingly using David Jones as a channel to the market. We believe investors should evaluate the performance of these units as one consolidated segment, this approach would allow investors to assess the risk posed by faltering performance of one division, on both units. We evaluate various scenarios for the future performance of the combined WHL Australia segment and assess the impact on its debt servicing. We highlight the sensitivity of this business to turnover growth levels, noting circumstances in which a breach of the debt covenants could occur.