Woolworths Group (WOW)

CommSec CommSec

 

24 February 2021

Results 

Half Year 2021

Half Year 2020

Change

Group Sales ($m)

35,845

32,410

+10.6%

Group eCommerce Sales ($m)

2,937

1,650

+77.9%

Australian Food Sales ($m)

23,449

21,200

+10.6%

Group NPAT ($m)

1,135

979

+15.9%

Gross Profit Margin (%)

29.4

29.6

-22bps

EBIT ($m)

2,092

1,893

+10.5%

Interim Dividend ($)

0.53

0.46

+15.2%

Woolworths (WOW) sales growth strong on COVID-19 concerns       

What happened?

  • Supermarket group, Woolworths (WOW) has reported a strong set of first half results which was mostly ahead of analyst expectations. Group sales rose 10.6% to $35.9 billion with online sales jumping 78% to $2.9 billion. Net profit for the group rose 16% to $1.1 billion while earnings (EBIT) grew 10.5% to $2.1 billion.
  • Woolies also lifted its return to investors by 15% on the prior year with a fully franked interim dividend of 53 cents per share. The ex-dividend date is 4 March 2021 while payment is set for 14 April 2021. 
Why did it happen?
  • Australian Food sales, which easily accounts for the majority of groups sales, saw double digit growth to $23.4 billion with comparable sales lifting 9.3%. Sales benefitted from COVID-related demand as well as the success of the Disney+ Ooshies campaign in Q1. Food sales did moderate in the Q2 with growth of 8.3% compared to 12.9% in Q1 as COVID restrictions eased.
  • Metro Food Stores underperformed with sales declining 6.7% due to lower foot traffic across CBD areas and transit hubs. Online (eCommerce) sales grew by 91.8% in the half to $1.8 billion, representing 7.7% of Australian Food sales. Interestingly, shoppers were shopping less frequently but with larger baskets over the period. Average prices (excluding tobacco) declined 0.8% in the half with prices falling 1.4% in Q2 due to the cycling of drought, extreme heat and bushfires in the prior year. Food sales in New Zealand also improved 4.3%.
  • BIG W sales were particularly strong, jumping 20.1% to $2.6 billion. Sales growth continued every month in the half and across all major categories. Earnings (EBIT) for the discount retail division surged 165% to $133 million and BIG W X (digital business) saw sales improve 120% in part due to increased demand for Home Delivery & Pick up.
  • Endeavour Drinks (consists of Dan Murphy’s, BWS and Cellarmasters) saw a 19% lift in sales to $5.7 billion as at-home consumption remained high due to COVID-19. The Christmas period was also exceptionally strong with record sales the week before Christmas at Dan Murphy’s and BWS.
  • WOW’s Hotels segment was the only one to report a drop in sales, falling 27.5% to $667 million as COVID-19 restrictions continued to impact trading. Sales in Q2 saw a slight improvement over Q1 as some restrictions began to ease. With sales declining, EBIT was down 45.4% to $122 million but an improvement on the $52 million loss in 2H20.

Where to now?

  • WOW provided a trading update for the first seven weeks of 2H21. Sales growth remains strong but has moderated from 1H21. Australian Food sales are up ~8% but NZ growth is more subdued at 1%. BIG W growth is 18% and Endeavour Drinks sales are 14% higher. Hotel sales declined 12% but at a lower rate than in 1H21.
  • Sales are expected to decline particularly over the March – June period compared to the year before as panic buying concerns ease. The exception is Hotels, with 2H21 EBIT anticipated to be well above 2H20. COVID-related costs are also likely to be materially lower than last year, subject to no further widespread prolonged lockdowns.
  • Following delays due to COVID-19, WOW has provided an update on its Endeavour Group (Drinks & Hotels) separation, which is likely to take place in June 2021 in the form of a demerger.
 

Tags:

WOW

Start trading today with Australia's leading online broker

Join now >

Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 ("CommSec") is a wholly owned, but non-guaranteed, subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 ("the Bank") and both entities are incorporated in Australia with limited liability.
This information is directed and available to and for the benefit of Australian residents only and is not a recommendation or forecast.

This information has been prepared without taking account of the objectives, needs, financial and taxation situation of any particular individual. For this reason, any individual should, before acting on the information on this site, consider the appropriateness of the information, having regards to their own objectives, needs, financial and taxation situation, and, if necessary, seek appropriate independent financial, foreign exchange and taxation advice. CommSec, and its related bodies corporate, do not accept any liability for any loss or damage arising out of the use of all or any part of this information. We believe that this information is correct as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness.

 

Disclaimer

This site is directed and available to and for the benefit of Australian residents only. © Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 ("CommSec") is a wholly owned, but non guaranteed, subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and both entities are incorporated in Australia with limited liability.

By clicking on the "Download the CommSec App" buttons above, you will be directed to itunes.apple.com or play.google.com. These sites are not affiliated with CommSec and may offer a different Privacy Policy and level of security.

Top