REPORTING SEASON: Woolworths Limited (WOW)
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Figure 1: Woolworths Limited 12 month chart
Woolworths Limited (WOW) profits slide following a big loss for Masters
– Woolworths Limited (WOW) posted a slightly above consensus 12.5% slide in annual profit to $2.1bn. Earnings growth from its core Australian Food, Liquor & Petrol division was modest at just 2.1%, accounting for 90% of the group’s profit. A loss from its Home Improvement unit was the biggest drag to WOW’s bottom line.
– Food & Liquor sales were disappointing (particularly in Q4). Greater than expected deflation in average prices (incl. the effects of promotions) together with price investment (i.e. cutting margins to compete with Coles) has held back results. Liquor sales (Dan Murphy’s & BWS) rose 4.2% to $7.7bn. Sales at Big W slipped 5.7% to $4.1bn. The discount department store was impacted by its transformation plan but only accounts for ~6% of the group’s sales. Its Master home improvement unit lifted sales as new stores were opened, however its reported net loss widened.
– WOW opened 30 new supermarkets, 10 Dan Murphy’s, 31 BWS, undertook a 117 store decline in petrol due to changes to the Woolworths/Caltex alliance, 2 new Big W stores & 9 Masters home improvement locations.
– A $0.72/s dividend was declared, payable to eligible investors on 9 Oct. WOW shares rose following the result, although it continues to underperform Wesfarmers (WES) owned rival, Coles. WOW is down 11% Year-to-date, while WES is down 0.9%. Looking ahead, no profit guidance was provided for FY16.
– The group’s chairman, Mr Waters will retire on 1 Sept and will be replaced by Origin Energy Chairman, Gordon Cairns. WOW announced the retirement of its CEO Grant O’Brien in June.