Woolworths boss Brad Banducci wants to open up by Christmas as profits roll in

Woolworths chief Brad Banducci is hoping for eased restrictions and lockdowns before Christmas and has vowed not to let Covid-19 curb growth plans for the supermarket.

Woolworths will reward shareholders with a $2bn share buyback. Picture: Dallas Kilponen

Woolworths chief Brad Banducci is hoping for eased restrictions and lockdowns before Christmas and has vowed not to let Covid-19 curb his growth plans for the supermarket, despite massive disruptions to his business, including 3300 of his staff stuck in isolation and shuttered stores.

Underlining his confidence in the future, even as the Delta strain runs through most of his markets in Australia and New Zealand to unsettle supply chains, distribution centres and at times the ability to secure enough staff to fill shifts, Woolworths showered investors with a $2bn off-market share buyback complemented by a 14.5 per cent hike in the final dividend.

Mr Banducci said 2022 was “shaping up to be a more challenging year” and Woolworths was being realistic about what could be done. However, while the pandemic might force him to delay his plans it wouldn’t kill them off completely.

“There are always places you can continue to evolve the business even if you can’t at the moment unfortunately in NSW and Victoria,” Mr Banducci said after Woolworths on Thursday reported a bottom line net profit of $2.07bn, up 77.8 per cent, as group sales rose 5.7 per cent to $67.27bn.

“We still see challenges ahead between now and Christmas as we drive vaccination rates and deal with the various challenges of the Delta strain … but we hope once we get through this first half (of fiscal 2022) we will have a little bit more of clean air to progress the rest of our agenda.

“We are confident that we have the right foundations in place to continue to deliver value for all our key stakeholders in the years ahead.”

Mr Banducci stopped short of signing up to National Australia Bank CEO’s Ross McEwan’s grand plan to open up Australia on Melbourne Cup day, which the bank boss dubbed ‘‘freedom day’’.

Woolworths CEO Brad Banducci: ‘There are always places you can continue to evolve the business even if you can’t at the moment unfortunately in NSW and Victoria.’ Picture: Adam Yip

“I think at this time we need to take a country perspective on everything and not look at it from a Woolworths perspective to see whether we benefit or not … we are really determined that what is right for Australia or New Zealand is right for us and we need to subjugate our commercial imperatives within that.

“We have a history of hoping for the best and planning very conservatively, just given the nature of what we sell, which is food and everyday needs, so I like Ross’s aspiration … it is a relative challenge running into Christmas and we have got our settings to make sure we plan accordingly.

“We need to take conservative settings given the nature of our business, and I tried to call this out in our profit announcement that we have a relatively volatile and challenging couple of months ahead.”

In the retailer’s last results to include the recently demerged Endeavour Group drinks and pubs business, Woolworths posted a net profit on continuing operations and before significant items of $55.69bn, up 4.9 per cent while earnings on continuing operations and before significant items rose 11.1 per cent to $2.76bn. Significant items for the year included $44m related redundancy costs for its supply chain network and $50m relating to asset impairments to its Metro stores, which suffered collapsing sales due to Covid-19 lockdowns.

There was plenty of freed-up capital and Woolworths added its name to the growing list of corporates filling investor pockets with higher dividends, special dividends and share buybacks by announcing a $2bn share buyback against a previously flagged range of $1.7bn to $2bn. The final dividend was also fattened, up 14.5 per cent to 55c per share, payable on October 8.

Woolworths had started 2022 in a strong position, despite the interruptions and volatility caused by lockdowns. Its flagship Australian supermarket chain increased sales by 4.5 per cent for the first eight weeks of the new financial year, ahead of market growth.

“Higher than anticipated sales growth has resulted from lockdowns across the country but particularly in our largest state, NSW, as in-home consumption has again increased,” he said.

However, not all parts of the Woolworths business have thrived since July.

“The ongoing impact of Covid has led to strong sales growth in the first eight weeks of 2022 in Australian food and more recently New Zealand Food, but negatively impacted Big W, with stores facing a number of trading restrictions,” Mr Banducci said.

“Covid costs have again increased, and for the first eight weeks, group Covid costs have been approximately $41m or 0.5 per cent of sales.”

The once loss-making Big W chain recorded earnings of $172m, up 344.9 per cent, as sales rose 11.6 per cent to $4.583bn.

But Mr Banducci admitted he was “anxious” and “very worried” about the disruptions to global shipping and supply chains and the ability of retailers to get stock into the country, especially general merchandise. Analysts asked him about stock availability at Woolworths’ general merchandise chain Big W and concerns about having enough stock for the lead up to Christmas.

“We are anxious”, Mr Banducci said. “Very worried about getting freight into New Zealand, and I think there are risks for every retailer in Australia and New Zealand in this space.”

Mr Banducci said as it became harder to secure shipping containers and efficiently pass those containers through ports and into its stores, retailers such as Big W might have to rethink their offer.

Many companies in Australia are facing supply issues, with the cost of shipping containers rising strongly and bottlenecks at key ports in China as there are further breakouts of Covid-19.

Shares in Woolworths ended up 17c at $40.99