Woolworths makes progress with turnaround


Woolworths makes progress with turnaround


Published Date: 2021-02-26 | Source: Stephen Gunnion | Author: Stephen Gunnion

Woolworths makes progress with turnaround

The retailer has grown first-half earnings, supported by strong sales at its food division.

Woolworths says measures it took to stimulate trade, strengthen its online capabilities and keep costs under control helped it grow first half earnings despite the ongoing impact of Covid-19. It's also strengthened its balance sheet, helped by the sales of some properties.

While consumer spending remained under pressure, it said Woolworths Food remained resilient throughout the six months, growing volumes and increasing its share of the groceries market. However, sales at its Fashion, Beauty and Home division declined - although online sales more than doubled.

Australian sales also picked up, helped by successful Black Friday and Cyber Monday campaigns. However, they were still down for the full six months due to a 12-week lockdown in the State of Victoria. David Jones reported an 8.8% decline in sales. Excluding Victoria, sales rose 5.9%, with online sales jumping 56%. Country Road's sales fell 5.2% over the half but grew by 8.2% excluding Victorian stores, with online sales rising 53%.

The retailer grew total sales by 5.3% to R43 billion over the six months to end-December, with trading momentum picking up in the final six weeks of the period. Adjusted profit after tax rose by a quarter to R2.7 billion and earnings per share (EPS) jumped 76% to 288.8c per share. Headline earnings per share (HEPS) grew 58% to 261.1c while adjusted HEPS rose 19% to 193.7c. It reduced its net borrowings by R5 billion to R6.8 billion but hasn't declared an interim dividend.

Woolworths said strengthening its balance sheet was a key focus over the period. Its results were positively impacted by the sale of David Jones' Bourke Street Mens property which resulted in a profit on sale of A$23.5 million and the renegotiation of various leases which resulted in lease exit and modification gains under IFRS 16 accounting standards of R667 million before tax. These are excluded from adjusted HEPS.

They retailers shares closed 1% up at R47.13 yesterday. They rose 11% on 25 January after it released a trading update.


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