The country’s biggest retailer Woolworths did everything right in the six months to December with revenue and earnings up strongly, a dividend increase for shareholders and the demerger of its grog business on track for a move this June.
While some report on Woolies half year focused on the way its sales growth in the first weeks of 2021 was stronger than Coles – 8% v 3.3%, the more important points for investors was the way sales and profits grew in the half year.
But like its rival, Woolies also warned investors that the June quarter performance and perhaps beyond, will see the company come off the boil.
“Looking ahead to the rest of the financial year, we expect sales to decline over the March-to-June period compared to the prior year in all our businesses, with the exception of hotels where venues were closed for much of the final four months last year, as we cycle last year’s COVID surge,”CEO Brad Banducci said.
“However, in parallel, we also expect COVID-related costs to be materially below the prior year, subject to no further widespread prolonged lockdowns.”
That will provide some mitigation of the expected sales slowdown. That will continue into the September and December quarters of this year simply because of the strong conditions reported (in results like those from Woolies and Coles for those quarters).
Sales rose at a solid 10.6% to $35.8 billion for the six months to the end of December, and earnings soared 28% to $1.135 billion, in line with market forecasts.
Group earnings before tax and interest rose 10.5% to $2.09 billion.
Woolworths declared an interim dividend of 53 cents per share, up 15% on the December, 2019 period.
Supermarket sales rose 10.6% to $23.4 billion, with demand for food and groceries remaining elevated amid sporadic lockdowns. EBIT rose 13% to $1.329 billion in the half. In New Zealand EBIT edged up 3% to $A181 million.
At Endeavour Drinks, earnings rose 24% to $419 million as total sales jumped 19% to $5.7 billion and online sales by 50%, boosted by at-home consumption and lockdowns closing pubs and clubs. This offset a 45% drop in profits from hotels to $122 million because of the lockdowns, especially in Melbourne..
Big W, long the millstone round the growth and earnings of Woolies, continued its good news story (like Target at Wesfarmers) with a solid sales and profit performance of its own.
Big W saw sales up 20.1% to $2.5 billion and earnings before interest and tax surged 166% to $133 million. That mean’s last year’s profit, the first time Big W has been in the black since 2015, is no longer an oddity.
Online sales at Woolworths’ digital division nearly doubled for the period to $1.8 billion, with the segment now comprising 7.7% of the retailer’s total sales. That’s less than the 9% to 11% estimate from the Australian Bureau of Statistics for the share of monthly sales held by online.
Total COVID-related costs of $277 million for the half hit Woolworths’ result, but the company expects that figure to fall this half, so far as there are no more lockdowns and the vaccinations continue.
Woolworths had been set to de-merge or otherwise sell off its $10 billion Endeavour drinks and pubs division, but put the plans on hold in 2020 due to the uncertain market conditions brought on by the virus.
Chairman Gordon Cairns said yesterday plans were now progressing well for the de-merger, with June as the most likely date for completing the spin off. That means demerger documentation should be issued next month.
Woolies shares rose by just over 1% to $39.50.
