Friday saw a trio of retailers release their 2013-14 results – one stood out, Harvey Norman (HVN), one was an expected loss – Noni B (NBL) and one, a big profit from Woolworths (WOW), failed to enthuse investors.
In fact the shares fell 2.1% to $36.16 for one very good reason – the parsimonious nature of the dividend up just 4% when earnings rose 8.5%.
The contrast with rival Wesfarmers (WES) was telling. Leaving aside the $1.1 billion buyout to be financed by the sale of its insurance business, Wesfarmers was far more generous with its shareholders.
It lifted total dividend by 20 cents for the year to $2 a share. That included a 10 cents a share ‘centenary’ special payment.
Contrast that with Woolies – it paid a final of 71 cents a share (up 1 cent, which isn’t generous), which took the total for the year of $1.37 a share – a whole four cents a share higher than the year before.
The retailer made a net profit of $2.45 billion for the year to June 30, up from $2.259 billion the previous year.
Sales were up 3.9% to $60.8 billion during the year, though the full year results were skewed slightly by the fact Woolworths reported a 53 week-year in 2012/13.
Excluding the impact of that extra week, sales were up 5.9% while underlying net profit was up 6.1%.
On the face of it a solid result, but no reason for directors to skim on the payment to shareholders.
WOW YTD – Dividend growth slows at Woolies
Woolworths did warn that it expect trading conditions to remain challenging in 2014-15 with cost-of-living pressures and economic uncertainty continuing to weigh on consumers.
But then so do many other companies who were more generous to shareholders (such as Harvey Norman, see seperate story).
The small rise in dividend came despite the company forecasting a 4% to 7% rise in earnings for the current financial year, which is not much different to what was reported on Friday.
It does have weaknesses in its loss making hardware businesses, and in the Big W department store chain, where earnings before interest and tax fell 19% to $152.9 million.
Hardware lost $169 million and both will be a drag on Woolies (Wesfarmers does have its drag in Target).
The higher overall profit was underpinned by a 9.1% rise in earnings before interest and tax from its Australian supermarkets, liquor stores and petrol outlets to $3.28 billion.
Sales rose 4.7% to 41.2 billion and the EBIT margin rose to a record 7.9% from 7.2%.
Earnings from NZ supermarkets’ EBIT rose 17.1% in $A terms to $271.4 million and 4.2% in NZ dollars. EBIT from hotels rose 6.5% on a normalised basis to $275.4 million.
