Woolworths earnings rise 3 per cent for year but full-year net profit plunges to $108m

Woolworths Group has announced a dire $108m net profit, a 93 per cent drop on last year.

Woolworths Group’s earnings have risen 3 per cent but the company bottom line has been smashed by impairments on its New Zealand supermarkets, leaving its overall profit just more than $100m.

Releasing its annual results on Wednesday, Woolworths posted a 5.6 per cent rise in sales to $67.9bn on the back of its Australian supermarkets.

Before the $1.5bn New Zealand impairment, Woolworths’ net profit fell 0.6 per cent to $1.7bn.

Reported net profit was $108m, including the impairment of the New Zealand Food business.

Group earnings rose 3.4 per cent to $3.2bn.

Woolworths ticks into its 100th year of operations in December. Picture: NewsWire / Max Mason-Hubers

Given the returns are treading water compared with Coles’ 10 per cent profit gain, outgoing chief executive Brad Banducci received fewer pointed questions from the media than his Coles counterpart a day earlier.

Speaking on Wednesday morning, Mr Banducci was however asked how he could claim “with a straight face” that supermarkets were not driving inflation when the public sees the company’s $1.7bn profit.

“Big numbers can be deceiving,” Mr Banducci said, adding that many Australians, including the reporters gathered, would have shares in Woolworths via their superannuation.

In response to a question about Woolworths’ profit margin being 100 basis points ahead of Coles’, Mr Banducci said the company’s e-commerce operations in particular had become more efficient in the past year, resulting in savings.

The supermarkets have been under an intense microscope of late, with parliamentary inquiries and allegations of price gouging.

On a personal level, Mr Banducci said the scrutiny “goes with the job”.

Woolworths had approached the inquires in a way as to “find the good” and see what actions they could implement. One such action had been making the cost per unit on items ($X-per-100ml etc.) more visible.

“We’re continuing to lower our shelf prices … It’s taken a while because we have to find value for our suppliers,” Mr Banducci said.

Woolworths chief executive Brad Banducci is in his final week of an eight-year term at the helm. Picture: NewsWire / Martin Ollman

The financial results encompass the Woolworths Group entities including Big W, its New Zealand supermarkets, the food brands it owns, plus the freight, data, real estate and sales businesses that feed the behemoth.

The results show Woolworths lowered prices in the second half of the financial year.

Asked if prices could have been lowered earlier, Mr Banducci said suppliers had been affected greatly by inflation the past few years, so shelf prices were the product of balancing wages, supplier payments and the price it sold products.

“We always have more things we can do for customers. We need to balance, in that construct, doing the right thing for our suppliers,” he said.

In the high inflation environment, singles, young couples and young families who were renting had changed their shopping behaviour the most, Mr Banducci said.

Woolworths has been putting a lot of effort into its e-commerce operations. Picture: NewsWire / Glenn Campbell

Woolworths needed to work on its “price perception” and communicate that to customers, Mr Banducci said, and promoting the one-shop-a-month 10 per cent off scheme was “crucial”.

The results are slightly better than market expectations.

Investors will receive a fully franked final dividend of 57 cents per share, down 1.7 per cent on last year.

But the company will also pay out a special $0.40 dividend, fully franked.

The special dividend comes from the $498m sale of its stake in Endeavour Group, which releases $209m of franking credits to investors.

EToro market analyst Josh Gilbert said the biggest positive from the results was an upbeat sales outlook for the year ahead.

“Many had expected a weak outlook to start this year, but we didn’t get that. Although the next fiscal year won’t be easy, it gives investors room to be cautiously optimistic,” he said.

Investments in e-commerce were bearing fruit, Mr Gilbert said, but the biggest challenge for incoming chief executive Amanda Bardwell would be “winning back the public’s trust after facing something of a PR nightmare in 2024”.

“It will be a baptism of fire for Amanda Bardwell, who will have to navigate increased regulatory scrutiny, cost pressures and increasing competition from Coles and Aldi.”

Originally published as Woolworths earnings rise 3 per cent for year but full-year net profit plunges to $108m