Woolworths earnings results

CommSec CommSec

 

20 February 2019

Results ($m)

Half Year 2019

Half Year 2018

Change

Sales 

30,587.0

29,907.0

+2.3%

Bloomberg Consensus 

30,612.0

 

 

Australian Food EBIT 

937.0

901.0

+4%

Group EBIT 

1,445.0

1,430.0

+1%

Net Profit after Tax (NPAT) 

979.0

969.0

+1%

Bloomberg Consensus 

1,013.0

 

 

Interim Dividend ($)

0.45

0.43

+4.7%

Woolworths (WOW) results fall short on softer Drinks business 

 

Results

  • Woolworths (WOW) posted a slightly softer than expected 1% lift in net profit to $979m for the 27 weeks to 30 December 2018. Group sales (which includes supermarkets, Big W and other divisions) rose by 2.3% and largely met consensus. 

Drivers

  • The result was driven by modest growth from its core Australian supermarkets business (65% of total profit), which did enough to offset weakness in its Endeavour Drinks (Dan Murphy’s and BWS) unit.
  • Sales across its Australian Food unit (supermarkets) rose by 2.3% to $19,892m. While sales growth was softer than rival Coles, it is still ahead on Coles’ supermarket sales by around 20%. Sales momentum improved in the second quarter while profit margins were flat. 
  • Endeavour Drinks was the main drag on the result with underlying profit slipping by 6.4% over the half despite improved sales. WOW blamed this on Dan Murphy’s missing expectations in a low-growth market, ‘cooler and wetter weather around key events and the timing of New Year’s Eve’ which falls in the current half.  
  • Big W sales rose by 2.7% however it has failed to translate to profits. Earnings declined due to markdowns in seasonal apparel following a slow start to the season and negative category mix. 
  • Earnings across its Hotels and New Zealand supermarkets went backwards. 
  • Online sales surged by 26.6% over the half and now accounts for 3.5% of total food sales. 

Dividend

  • WOW will pay eligible investors a $0.45 per share interim dividend on 5 April and trades ex-dividend on 28 February. This is a near 5% lift on last year. WOW intends to return up to $1.7bn in capital to investors following the sale of its Petrol business to British retailer, EG Group (completion expected around March). 

Outlook

  • The tone in the outlook seemed to be interpreted as downbeat by the market. WOW expects conditions to remain challenging, for consumer demand to be subdued and anticipates input cost pressures. Competition is also expected to ramp up with the arrival of German hypermarket chain Kaufland and Amazon Fresh. 

Share price

  • WOW shares slumped on the result and its cautious outlook. 

Tags:

WOW

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