Woolworths - One to avoid

Woolworths - One to avoid. In a presentation to advisors Crispin Murray, Head of Equities at BT Investment Management, says that there are a number of concerning changes around Woolworths that make it a stock to avoid. Firstly, Murray says that as a business Woolworths is becoming more capital intensive and consequently cash flows are deteriorating. As a result of that they are actually no longer covering their dividend with cash flow. They are having to borrow to meet their dividend at the moment. In addition Murray says that concerns around declining EBIT margins are starting to undermine the earnings certainty and predictability that many investors have become used to. Specifically, margins are being squeezed by increased competition domestically from Coles (WES) and also from international competitors such as ALDI. In this presentation Murray gives his outlook for equities takes a closer look at the headwinds facing Woolworths and explains why he believes Qantas and Telstra will continue to perform. (VIEW LINK) @btim