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Despite strong sales, Woolworths reports minor profit dip

A woman shops at Woolworths during the Covid-19 crisis.

Supermarket giant Woolworths has reported a 1.2-per-cent drop in underlying profit to $1.6 billion due to skyrocketing costs and the temporary closure of its hotels business.  

The retailer recorded sales of $63.7 billion in FY20, up 8.1 per cent on the previous year, due to strong performances at supermarkets, liquor stores and Big W department stores.

However, one-off costs for the group ballooned to $591 million. These included $185 million related to staff underpayments, $176 million in supply-chain transformation costs, and $230 million for the restructuring of Endeavour Group.

In Q4, Woolworths Supermarkets saw like-for-like sales growth of 8.9 per cent. Earnings in the second half increased by 4.6 per cent with Covid-related sales growth somewhat offset by roughly $290 million in Covid-19 costs such as cleaning and security. 

Online was a big winner for Woolworths this year as many consumers opted to avoid crowded supermarkets. Group online sales rose 41.8 per cent to $3.5 billion, with record Q4 online penetration of 6.3 per cent. 

Department store Big W made a major turnaround in FY20, returning to profit and reporting earnings before interest and taxes of $39 million.

CEO Brad Banducci said Woolworths is “especially proud” of the achievements of the Big W team.

“Big W had strong sales momentum prior to Covid but sales growth increased materially from March. Growth was initially in lower-margin household items; however, in Q4, all major categories delivered strong growth including Apparel. Online sales increased by 181 per cent in Q4 to 8.4 per cent of total sales,” he said. 

Looking towards the year ahead, Banducci is mindful of continuing to providing a safe environment for staff and members of the public. 

“The main priority for F21 is making CovidSafe a part of everything we do,” he said. 

“I again want to recognise the way our team has continued to respond to the ongoing challenges, and I continue to be inspired by our team’s collective commitment to do the right thing.”

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