Woolworths H1 profit soars to $969 million, beating Coles

WOOLWORTHS’ first-half profit jumped 37.6 per cent to $969 million, beating Coles as food sales at its Australian supermarkets are also on the rise.

WOOLWORTHS’ first-half profit jumped 37.6 per cent to $969 million, beating Coles after comparable food sales at its Australian supermarkets rose 4.9 per cent.

The retail giant on Friday increased its interim dividend by more than 25 per cent to a fully franked 43 cents after pre-tax earnings for the 27 weeks to December 31 soared by 9.9 per cent.

Total group revenue rose 3.8 per cent to $30 billion driven by strong sales growth from its supermarkets, Dan Murphy’s, BWS and the group’s hotels.

Comparable food sales rose 4.9 per cent compared to the same period a year ago with like-for-like sales growth particularly strong at 5.1 per cent in the second quarter.

The comparable food sales growth far outpaced that of rival Coles, which on Wednesday recorded comparable food and liquor sales growth of 0.9 per cent for the half and 1.4 per cent for the second quarter.

Lara Tumilovics and Amanda Mcintyre at Woolworths Shopping complex in Toorak, Melbourne, which is among the first stores in Victoria to phase out plastic bags. Picture: AAP

Chief executive Brad Banducci said food sales growth may moderate in the second half, but added that its labouring discount department store Big W will lift performance in the period.

Mr Banducci said Big W was performing in line with its turnaround plan but it has a long way to go.

“Customers are noticing improvements, resulting in a 1.6 per cent increase in transactions and 5.4 per cent growth in the number of items sold in the half,” he said.

Mr Banducci, who led the supermarkets division before becoming chief executive, said the growth was an early sign of the group’s transformation.

“At the end of 2017 we said that we were moving from turnaround to transformation. In the current half we have seen some early signs of this transformation with good progress on a number of strategic initiatives and pleasing sales growth from all of our businesses,” he said.

“The emphasis on transforming our business will continue in the second half and into the 2019 financial year,” Mr Banducci said in a statement to the ASX.

Woolworths CEO Brad Banducci during their AGM in Melbourne. Picture: Aaron Francis/The Australian

“Our goal is to deliver a consistently good experience for our customers and team and leverage end-to-end process redesign and technology to improve our underlying productivity.”

The news comes after Wesfarmers’ first-half profit plummeted 86.6 per cent to $212 million due to writedowns on its UK hardware business and Target department stores but tentative signs of improvement at Coles supermarkets appear to have cheered investors.

Net profit fell on the back of more than $1.3 billion in previously announced impairments — the bulk of which were made against Bunnings UK and Ireland — but a second-quarter lift in comparable food and liquor sales growth helped Coles deliver better-than-expected earnings margins.

Coles supermarkets are still behind Woolworths. Picture: AAP

Comparable food and liquor sales growth slipped from 1.3 per cent a year ago to 0.9 per cent for the six months to December 31, but the decline was loaded toward the first quarter as growth returned to 1.3 per cent in the second quarter.

The improvement could suggest Coles was making headway against resurgent rival Woolworths.

Coles’ earnings before interest and tax (EBIT) fell 14.1 per cent to $790 million, partly due to investments in lowering prices, but an EBIT margin of 4.0 per cent was 0.5 percentage points ahead of that expected by Citi analysts. Wesfarmers managing director Rob Scott said Coles was expected to continue to improve its business in the second half.

“Coles maintained good sales momentum during the half, with transaction growth accelerating in the second quarter and reaching the highest level of quarterly comparable transaction growth in six quarters,” Mr Scott said.

WOOLIES’ CHANGES PAY DIVIDENDS IN H1

* Profit up 37.6pct to $969m

* Revenue up 3.8pct to $30b

* Fully franked interim dividend up nine cents to 43 cents