Woolworths beats Coles again but bag ban bites
Retail giant Woolworths has posted a 12.5 per cent jump in profit thanks to growing sales and earnings from its supermarket business, offsetting another loss-making year at Big W.
But Woolworths' grocery sales slowed considerably in the first weeks of the new financial year as customers were repelled by the removal of single-use plastic bags and attracted to rival Coles by its popular Little Shop toy giveaway.
The sales slowdown appeared to spook investors, who sent to stock down as much as 3 per cent when the ASX opened. By 10.30am, Woolworths shares were down 2 per cent at $29.
The retailer on Monday reported net profit after tax of $1.7 billion for the 12 months to June 24, up from $1.5 million last year, and said it would reward shareholders with a special dividend off the back of the strong performance.
Excluding its petrol station business, which it expects to soon sell, and its discontinued hardware business, Woolworths' net profit after tax was $1.6 billion - in line with the market’s expectations.
Australian supermarket sales grew 4.3 per cent in both gross and comparable terms, while supermarket earnings before interest and tax grew 9.6 per cent.
Comparable sales slowed to 3.7 per cent and 3.1 per cent in the third and fourth quarters respectively, Woolworths said, as it cycled strong numbers in the prior corresponding periods and ran into higher fruit and vegetable deflation and falling infant formula sales.
Woolworths has now outperformed its rival Coles on comparable sales growth for seven consecutive quarters, after the Wesfarmers-owned supermarket last week revealed growth of 1.8 per cent for the most recent quarter.
However, food sales growth slowed to 1.3 per cent in the first seven weeks of the current financial year - the slowest rate in almost two years, Woolworths said.
Sales had been affected by the removal of single-use plastic bags, Coles’ popular Little Shop promotion, fresh food price deflation, and cycling its own Earn and Learn program last year, under which shoppers could earn equipment for their school by collecting stickers for dollars spent at the checkout.
Chief executive Brad Banducci said he expected sales momentum to improve later in the half.
“We ... are confident that we have strong plans in place to be ‘consistently good’ at the fundamentals and drive further shopping differentiation relative to our competitors,” he said.
The company's discount department store chain, Big W, ran at a $110 million EBIT loss, an improvement from last year when it lost $151 million.
Comparable sales at Woolworths' bottle shop chains, BWS and Dan Murphy's, grew 3.6 per cent, but earnings growth was confined to 2.8 per cent to $516 million due to price competition.
Earnings from the company's controversial poker machine and pubs joint venture jumped 11 per cent to $259 million - or about 10 per cent of the group's earnings.
Mr Banducci said the company had "fixed the basics" of its business.
"We plan to leverage digital and data to transform our businesses and deliver both exceptional customer and team experiences leading to sustainable growth for our shareholders," he said.
Woolworths announced a dividend of $1.03 a share, including a special dividend of 10¢ in recognition of improved trading and stronger balance sheet, up 22 per cent from last year.