Woolworths: Supermarket profit soars 56 per cent to $2.7 billion

The discount department store lost $85 million over the year but the collectables promotional campaigns continue to have a major impact on performance.

Woolworths has posted a 56 per cent net profit jump to $2.7 billion but the continual weakening of Big W weighed on the strong result as the group proceeds with plans to close dozens of stores.

The underperformance of the liquor business in BWS and Dan Murphy stores also weighed on the group’s overall result but the supermarket giant once again beat its arch rival Coles.

Supermarket sales were 5.3 per cent higher to $39.6 billion.

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Chief executive Brad Banducci said Woolworths had managed to turnaround a weak result in the first half of the financial year when its results were rocked by the controversy surrounding the removal of single-use plastic bags, volatile weather and the success of Coles’ Little Shop campaign.

This ascendancy over its rival appears to have continued in the first eight weeks of FY20 thanks to the success of its own Ooshies collectables promotion, with comparable sales growth lifting to 7.5 per cent across its 1000-plus network of supermarkets.

The massive jump to its statutory profit was impacted by one-off occurrences including the $1.1 billion sale of its petrol business and a $371 million impairment related to the Big W chain and distribution centre closures.

Woolworths appears to remain on top of its arch rival Coles. Picture: AAP/Dan Himbrechts

The discount department store division remains a concern for the group suffering a full-year loss of $85 million as plans for up to 30 store closures proceed, which Mr Banducci said would “accelerate the path to profitability”.

Big W did perform better than it did last year when its earnings loss reached $110 million as sales from continuing operations increased by 4.2 per cent to $3.8 billion.

“We were pleased with the material improvement in sales growth in Big W over the course of FY19, with customers noticing the improvements we have been making to price, range and in-store experience,” Mr Banducci said.

Kids love those Ooshies.

Online sales increased by nearly a third to $2.5 billion, driven by strong growth from WooliesX, CountdownX and Big W, while on-demand delivery increased to a total 736 sites across the supermarkets, BWS and Dan Murphy’s stores.

By the end of FY19, the group had also established 112 drive-through or drive-up locations.

Gross profit margins at the Australian food division softened slightly, which the company blamed on more stock being written off, wasted, stolen, cleared or marked down during the year.

“We remain focused on reducing stock loss in FY20 following a relatively poor performance in FY19,” Mr Banducci said.

Meat price inflation and the impact of fuel redemption costs being recorded in Australian Food also took a toll on margins.

The Endeavour Drinks liquor business, which could soon be merged with Woolworths’ hospitality segment and sold off, also reported an earnings decline, dropping by 9.7 per cent to $474 million.

This was despite improved sales growth at Dan Murphy’s and BWS in the second half.

Woolworths said shareholder approval for the restructure of Endeavour and AHL — first flagged in July — will be sought at the annual general meeting in December.

Mr Banducci said he expected an uncertain consumer environment and other cost pressures to weigh but insisted Woolworths was “well placed to respond to these challenges”.

— with AAP

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