Woolworths trims dividend after difficult year


Woolworths trims dividend after difficult year


Published Date: 2018-08-24 | Source: Stephen Gunnion | Author: Stephen Gunnion

Woolworths trims dividend after difficult year

The retailer says the new financial year has got off to a positive start after it restructured and impaired its David Jones chain in Australia

"A difficult year" is how Woolworths describes its most recent financial period. Costs and disruptions associations with a restructuring of its David Jones business in Australia and a poor performance at its SA fashion business left the retailer reeling, with the result that shareholders are faced with a reduced dividend.

Woolworths impaired the carrying value of David Jones by close to R7 billion in the first half of the year, leaving it with a full-year loss.

Turnover and concession sales rose 1.6% to R75.2 billion in the 52 weeks to 24 June. They were 2.9% higher in constant currency. Sales at its SA Fashion, Beauty and Home division declined by 1.5%, with comparable store sales falling 4.1%. It says its womenswear modern range failed to resonate with core customers and that led to higher markdowns and promotional activity, reducing its gross profit margin by 1.2% to 46.7%. Despite good cost control, its operating profit dropped 21.3% to R1.7 billion.

A strong showing from its Food business helped cushion the retailer, with sales growth of 8.4% and comparable store sales growth of 4.8% as it raised prices by an average 3.2%.

Financial Services also had a good year as it grew its average debtors' book by 4.6% and reduced the impairment rate by 1.1% to 5.2%, resulting in 11.9% growth in operating profit.

In Australia, it said it introduced new merchandise and finance systems to its David Jones department store chain during the year, put its online systems on a new platform and introduced a new food initiative. It also moved the David Jones head office from Sydney to Melbourne. That resulted in an improvement in second-half sales, which were up by 2.2%, reducing the full-year sales decline to 0.9%. The investment in food and other strategic initiatives left operating profit 50% lower at A$64 million.

Its Country Road business had a mixed year, with a weaker performance from womenswear offsetting strong showings from Witchery, Mimco and Politix. Comparable store sales, excluding the recently-acquired Politix chain, declined by 1.8%. Including Politix, they rose 1.7%.

The David Jones impairment resulted in a R3.55 billion loss for the year, while earnings per share (EPS) dropped 165% to a loss of 369.5c per share. Excluding the David Jones impairment, headline EPS fell 17.7% to 346.1c while adjusted diluted HEPS declined by 12.8% to 364.1c. It's cut its total dividend by 23.6% to 239c per share.

Woolworths says it's made a number of changes to its structure, process and product offering to improve its womenswear ranges. The David Jones restructuring has also reduced its cost base across Australia by A$25 million.

It says trading for the first seven weeks of the new financial year has shown positive signs, with sales at David Jones and Country Road up by 3.7% and 2.1% respectively. In South Africa, Food sales are up 7.6% but Fashion, Beauty and Home are down 1.7%, mainly due to a relatively smaller winter sale.

Its shares declined 1.8% to R50.60 yesterday.


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