Woolworths feelings virus impact, as profit falls

Woolworths is seeing softer grocery sales in areas which normally have Chinese students, as the coronavirus also threatens to delay shipments.

Woolworths CEO Brad Banducci. Picture: Adam Yip

Woolworths, the nation’s biggest retailer, says supermarkets in suburbs with high catchments of Asian shoppers and overseas Chinese students have suffered softer grocery sales since January, as the coronavirus also threatens to delay shipments of key products.

The warning came as the supermarket giant reported an 8 per cent fall in half-year net profit, and lifted its estimation of how much its staff were underpaid, amid a pay scandal.

Chief executive Brad Banducci told The Australian that the retailer, which also owns general merchandise store Big W and liquor retailer Dan Murphy’s, had noticed a drop off in sales in the wake of the coronavirus and the absence of Chinese students, many of whom who are currently in lockdown in China.

“In terms of our comments and the whole supply issue which we can talk to on the coronavirus, and some delays over shipping product out of China which are not impacting us at the moment, but if the delays continue could be a material impact,’’ he said.

Up to 70,000 Chinese students studying in Australia remain stranded in China and are likely to be unable to commence the new university year.

“The comment I want to make as we come out of resort (holiday) time and we go back into that school and back to university time we are starting to see some volatility - it is still very early days - in our stores that are slightly more skewed towards supporting and serving our Asian customers. We are starting to see a little bit of softness there of course as we don’t see the students flowing into our supermarkets.

“I wouldn't like to overplay it but it is an issue that we will continue to dynamically watch.’’

Meanwhile for local Woolworths customers, the retailer is focusing on building up enough stock for hygiene items such as hand sanitisers and disinfectants.

Combined with bushfires and poor weather it had produced a slower start to the year than hoped, with sales growth of approximately 3 per cent and comparable sales growth of approximately 2 per cent for the first seven weeks of the second half, against stronger 3.8 per cent same store sales growth for the second quarter.

Meanwhile Woolworths says profit declined in its first half, partly because of a worker-pay scandal.

Woolworths said its net profit in the half year ended January 5 was $887 million, a decline of 8 per cent. Revenue rose 6 per cent to $32.4 billion.

The company declared an interim dividend of 46 cents per share, roughly a 2 per cent increase.

Woolworths’s profit in the half was hit by a pretax charge of $80 million tied to backplay for workers affected by underpayments the retailer has reported and another $51 million pretax charge on its spin-off of the Endeavour Group drinks business.

Stripping out those costs, Woolworths said its net profit from continuing operations but before one-off items was $979 million, a nearly 16 per cent increase.

The company said sales in its main Australian food unit rose more than 6 per cent, New Zealand food sales rose about 5 per cent in local currency and sales at its Big W discount department store chain rose about 3 per cent.

Looking ahead, Woolworths said there had been a slower start to trading in the fiscal third quarter, reflecting in part the effects of the Australian bush fires and the coronavirus epidemic. However, it said that its previously struggling Big W chain would post a profit for the full fiscal year.

Meanwhile Woolworths upped its estimated staff underpayments to $315 million and says the final amount could still be higher once a review into the nine-year scandal is complete.

The supermarket giant said it would exceed its initial guess of $200 million to $300 million in salaried staff underpayments since 2010, with a review having now covered five years of data.

The previous estimate was based on two years worth of information.

With Dow Jones, AAP