Woolworths unveils $1.235 billion loss

WOOLWORTHS has reported a full-year loss and a 40.8 per cent decline in earnings from its food and petrol business.

WOOLWORTHS has reported a full-year loss of $1.235 billion and a 40.8 per cent decline in underlying earnings from its Australian food and petrol business.

The supermarket giant’s net profit for the 52 weeks to June 26 slipped from last year’s $2.146 billion profit as it took $2.628 billion of writedowns mostly related to its ongoing exit from the hardware sector and its underperforming Big W stores.

But earnings before interest and tax from Australian food and petrol also dropped to $1.76 billion, from $2.97 billion in the prior corresponding period, due to lower prices and a decline in items per basket.

The result marks Woolworths’ first loss in its 23 years as a public company.

Woolworths Group chief executive Brad Banducci described FY16 as a “year of unprecedented change for Woolworths”. “The decisions we have taken and investments we have made have had a material impact on our FY16 results but have been necessary to begin the rebuilding of Woolworths,” he said.

“We are seeing early signs of progress as we work to restore our competitiveness and improve our culture in Australian Food. We have also addressed significant issues facing the Group with the decision to exit Home Improvement and decisive action taken on Big W to reposition the business.

“Sales improved over the year for our Australian Food business with comparable sales in the fourth quarter the strongest for the year driven by strong comparable transaction growth.

“However, underlying earnings from Australian Food and Petrol were down 40.8 per cent on last year, reflecting lower sales growth driven primarily by our investment in lower prices and a decline in items per basket.”

“Top of my five priorities is getting our customers to put us first and making the right business decisions to enable this to happen.

“We are regaining competitiveness with improving customer metrics and sales and transaction growth demonstrating our customers are recognising our investment in lower prices, better service, fresh fruit and veg and improved store experience. Our improving team engagement scores show we are also changing our culture for the better.”

As part of the overhaul introduced by Mr Banducci, who took control of the group six months ago, 500 support office and supply chain roles have been permanently removed, and 1000 roles have been moved “closer to stores and customers”.

Woolworths, which slashed its dividend from 72 cents a year ago to 33 cents, made $1.873 billion of writedowns against its failed hardware businesses, which it will be rid of by December.

On Wednesday, it said it had agreed to sell its Home Timber & Hardware business to Metcash for $165 million by October, and would close all its Masters stores by early December.

It comes after rival Wesfarmers yesterday revealed the depth of its own woes from $2.2 billion in writedowns in the struggling Target chain and its coal assets, with a profit plunge of 83.3 per cent to $407 million.

Coles’ full-year earnings rose 4.3 per cent to $1.86 billion with food and liquor sales increasing 5.1 per cent to $32.6 billion, and the crucial comparable sales growth lifted 4.1 per cent.

Woolworths’ comparable sales fell 1.1 per cent in the final quarter of the year, marking the 28th straight quarter the nation’s biggest supermarket has been beaten by Coles.

Woolworths chairman Gordon Cairns said trading conditions in the coming year would remain “highly competitive”, but the company was encouraged by “some early signs of momentum” at the end of the FY16.

WOOLWORTHS’ WOES

* Net loss $1.235b v $2.146 profit

* Sales revenue down 1.23pct to $58.086b

* Final dividend down 39 cents to 33 cents, fully franked