According to an advance copy of the Woolworths’s annual report, the about to retire CEO Michael Luscombe took a $2.6 million pay cut in the 2011 financial year, but still managed to sound confident about the retailer’s outlook, despite its toughest year for more than a decade.
Mr Luscombe though still earned nearly $6 million for the year (his retirement happens next month and his total payout won’t be known for a year). According to the annual report, Mr Luscombe took home total pay of $5.73 million in 2011, down from $8.33 million in 2010.
The report showed that all executives dropped their total salary due to a decline in the share-based payments component as a result of the poor market conditions and slower net profit growth for the retail giant in the 2011 financial year.
But it was a still confident Mr Luscombe who spoke to shareholders via his comments in the annual report.
The report is Mr Luscombe’s final to shareholders before Grant O’Brien takes over his role next week.
He said Woolworths still expects to lift net profit in the current year but admitted the retail sector faces significant challenges.
Woolworths lifted full-year profit in the 2011 financial year by just 5.1% to $2.12 billion, which was the worst profit result for the group for more than a decade.
The company has forecast a 2% to 6% increase in net profit for the 2012 financial year.
That, however, will be the slowest earning guidance the company has issued for more than a decade.
However, that 2% to 6% outlook is subject to the current global financial uncertainties not deepening, at home and abroad.
2011 saw Woolies encounter "unprecedented macro economic circumstances", according to Mr Luscombe.
"Consumer confidence remained historically low as customers reacted adversely to rising utility costs, interest rate hikes in the first half of the year and general global uncertainty, and opted to save rather than spend their money," he said.
He said that it was now "very difficult" to accurately predict the outlook for this year.
However, there was optimism with the company recording positive profit results in all trading divisions, particularly Australian supermarkets and liquor, with improved EBIT (earnings before interest and tax) of above 7%.
Trading in July and August had followed the trend of late May and June when consumers contributed what it called ‘‘anaemic’’ spending.
It grew market share in the fresh food and packaged goods segment, but profitability was weak compared to rival Coles.
It said that earnings this year will also be affected by anticipated start-up costs for its new Masters home improvement business of as much as $100 million.
The first Masters store has already opened and a 19th is being built.
Fairfax papers reported this morning that Woolies and its US joint venture partner, Lowes, had spent more than $460 million on assembling sites for Masters’ stores and other infrastructure for the hardware foray.
Chairman James Strong said in the annual report that the future was bright, despite the economic turmoil.
“Given the current difficult conditions, the outlook for the next twelve months of trading is uncertain.
“Despite this the Woolworths Board has provided guidance to the market based on realistic lower growth expectations in the short term, and taking into account the effect of costs associated with the accelerated start-up of a major new business in home improvement.
“The Board and management remain confident about the outlook for Woolworths’ continued growth and success,” Mr Strong said.
The company’s shares increased by 26c, or 1.1%, to $24.83 in a market that sagged 1% in glum afternoon trading.
