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Woolworths profit jumps 12.5 per cent

Woolworths-groceryWoolworths has announced a 12.5 per cent jump in full-year net profit, as price cuts attracted more shoppers to its stores, but revealed that sales so far in fiscal 2019 had slowed.

The retailing giant posted a $1.72 billion net profit after tax, up from $1.53 billion in the 2017 financial year.

Woolworths will use the increased profit to pay shareholders a 50-cent final dividend that matches the first-half distribution. That will be topped up with a one-off 10 cent per share special dividend.

Earning from Australian supermarkets rose 9.6 per cent to $1.76 billion, delivering its first annual growth in three years despite $130 million of additional investment in strategic initiatives.

Sales rose 4.3 per cent to $37.4 billion, with sales from a net 10 new stores augmenting same-store sales growth of 4.3 per cent.

Woolworths Group CEO Brad Banducci said the group’s focus on putting customers first remains at the core of what the group does.

“All businesses saw an increase in customer satisfaction and traffic (transactions) during the year. This has led to strong sales and EBIT growth and a significant reduction in net debt, even as we invest in strategic initiatives focused on delivering sustainable growth into the future,” said Banducci.

Throughout the year, the group completed 80 renewals, including 11 new stores, and 54 upgrades, including the Marrickville Metro and Plumpton and Lakemba concept stores.

Comparable sales grew in double digits for Metro stores, and a new alliance with Caltex will see 250 Metro stores opened on Caltex sites over the next six years.

Woolworths also stepped up its investment in WooliesX, its digital hub, opening new customer fulfilment centres in Sydney and Melbourne to improve home delivery experiences, and increasing loyalty program members to 10.9 million by the end of June.

Over 2900 stores, including supermarkets across Australia and New Zealand, Dan Murphy’s, BWS and Big W, now offer buy online, pick-up in-store options.

Woolworths’ Endeavour Drinks business saw increased comparable sales by 3.6 per cent. Sales growth remained robust in the second half of the financial period, though EBIT growth was lower due to increased price competition impacting Dan Murphy’s.

Banducci said he was pleased with the progress made this year but acknowledged that the plastic bag ban impacted on sales.

Sales in its Australian food division in the first seven weeks of fiscal 2019 slowed as a result.

“Sales have been impacted by customers adjusting to the phasing-out of single-use plastic bags, a competitor continuity program (Little Shop), meat and fruit and vegetable deflation, and the cycling of our successful Earn and Learn program in the prior year,”  Banducci said.

Sales momentum is expected to improve over the course of the half year, as customer satisfaction metrics are broadly back to levels prior to the bag ban.

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