JOHANNESBURG – Woolworths (Woolies) surged more than 5 percent on the JSE yesterday, shrugging off the 61.5 percent tumble in profits for the 52 weeks ended in June.
The group said that its annual adjusted profit before tax fell 54.5 percent to R2.2 billion underscoring the severe impact of Covid-19 pandemic disruptions on its operations.
Chief executive Roy Bagattini said that the year under review was a tale of two halves with adjusted profit before tax 12.3 percent below the prior year, at R2.4bn in the first half.
Bagattini said the pandemic hurt its second-half performance after the closure of all non-food stores in South Africa and more than 300 Country Road Group stores in Australia.
“The onset of Covid-19 caused significant disruption to our businesses, resulting in store closures, reduced footfall, lost sales and margin dilution due to promotional and other initiatives to clear inventory,” said Bagattini.
Bagattini said Woolies’ food business grew turnover and concession sales grew 13.3 percent in the second half, with full-year growth at 10.7 percent despite the constrained environment.
He attributed the growth to the strength of the Woolies brand.
“We saw growth in the food business in addition to the market share growth throughout the Covid-19 crisis,” Bagattini said.
Operating profit from the food business increased 19 percent to R2.71bn, returning an operating margin of 7.7 percent.
Online food sales grew 87.8 percent in the second half and 57.2 percent for the remainder of the financial year.
However, sales from the Fashion Beauty and Home business declined by 24.1 percent during the second half, ending the year 10.7 percent down on last year.
Operating profit decreased 61.5 percent to R683 million, resulting in an operating margin of 5.5 percent.
The group said that while David Jones stores continued trading during the second half of the year, there was a significant decline in footfall, which began earlier in the half, with the Australian bush fires and the Covid pandemic.
It said turnover and concession sales declined 17.2 percent in the second half of the year, ending the year 6.4 percent below those of the the prior year.
Operating profit at Country Road Group stores decreased by 60 percent, resulting in an operating margin of 4.3 percent. The group did not declare a final dividend, for the 2020 financial year, with the interim dividend of 89 cents per share being the total dividend for the year which was 53.3 percent lower than the dividend declared in the final year.
Bagattini said the group was taking a prudent approach and future dividends would be considered in the context of the conditions prevailing at the time. Investment analyst at Mergence Investment Managers, Lulama Qongqo, said the results were expected and priced-in, especially given that Woolies had provided the market with guidance before today’s results.
“What stood out for me was that they are unlocking cash in multiple ways and continuing with the execution of their strategy despite the challenging market conditions in Australia,” Qongqo said.
Earnings per share were 82.6c per share compared to -126c per share for the prior year, while headline earnings per share and adjusted diluted headline per share dropped by 64.8 and 45.7 percent to 116.2c and 193.6c per share respectively, on a 52-week comparable basis.
Woolworths shares closed 6.57 percent higher at R36 on the JSE on Thursday.