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Woolworths' profit up despite Big W slide

Business

Woolworths has raised full-year profit by 7.2 per cent to $1.75 billion after a robust second-half performance by its Australian supermarkets offset softness at Big W and the liquor division.

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Normalised revenue for the year to June 30 climbed by 3.4 per cent to $59.98 billion, with 3.1 per cent comparable sales growth at the company’s Australian food segment boosted by 3.9 per cent growth during the second half.

The first eight weeks of FY20 have been even better as Lion King Ooshies collectables helped drive 7.5 per cent comparable sales growth across the company’s 1,000-plus network of supermarkets.

Woolies has also lifted its fully franked final dividend by seven cents to 57 cents, for a full-year payout of $1.02.

Chief executive Brad Banducci said its supermarkets had recovered well from a first-half hit from the removal of single‑use plastic bags, volatile weather and the success of rival Coles’ Little Shop collectables.

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 group’s statutory profit, which includes a $1.09 billion gain on the sale of its petrol business and a $371 impairment related to the Big W chain and distribution centre closures, jumped 56.1 per cent to $2.69 billion.

Big W leaked another $85 million in earnings during the year, in line with guidance, despite sales from continuing operations increasing by 4.2 per cent to $3.8 billion.

The department chain’s result was, however, an improvement on a $110 million earnings loss a year ago.

“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,” Banducci said.

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.

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”.

Woolworths shares fell by 1.41 per cent to $35.67 after 20 minutes of trade on Thursday, having hit a near five-year high of $36.43 the previous session.

-AAP

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