The Woolworths Group Ltd (ASX: WOW) share price has risen after the supermarket giant has released its FY20 result.
Woolworths FY20 report
Woolworths said that its group sales increased by 8.1% to $63.7 billion with online sales jumping by 41.8% to $3.5 billion.
However, the closure of its Hotels segment, higher customer costs and higher team safety costs caused group EBIT (click here to learn what EBIT means) to fall by 0.4%.
Woolworths’ underlying net profit dropped by 1.2% to $1.6 billion – this measure has been ‘normalised’ because last year was a 53 week period and this year includes lease account AASB 16 changes. However, Woolworths’ net profit after significant items fell 56.7% to $1.165 billion.
Let’s look at the different segments’ revenue, normalised for 52 weeks:
Australian Food sales rose 8.3% to $42.1 billion. New Zealand Food revenue went up 10.5% to $6.8 billion. Big W sales grew 9.1% to $4.1 billion. Endeavour Drinks revenue grew 9.9% to $9.27 billion. Hotels revenue dropped 19.5% to $1.32 billion.
Australian Food EBIT rose 22.2% to $2.2 billion. New Zealand Food EBIT went up 29.3% to $358 million. Big W managed to generate a positive EBIT of $39 million, up from a $85 million loss last year. Endeavour Drinks (which includes Dan Murphy’s) EBIT grew 12.9% to $569 million. Hotels EBIT plunged 34.3% to $172 million.
Woolworths saw central overheads, which detracts from group EBIT, worsened by 141.1% to negative $151 million.
Last year’s EBIT included $1.2 billion from earnings and significant items relating to discontinued operations. FY20’s EBIT had $591 million of significant items – $176 million of costs relating to NSW supply chain transformation, $230 million of costs relating to Endeavour Group’s transformation costs and $185 million of employee salary remediation costs.
Woolworths’ FY20 dividend was $0.94 per share, down 7.8% from $1.02 last year.
Outlook
In the first eight weeks of FY21, Woolworths has seen total sales growth of 12.4% with 12% growth from its Australian supermarkets. Big W sales are up 21.1%, Endeavour Drinks sales are up 23.7% but Hotels revenue are down 31.3%. Group online sales are up 84.6%. COVID-19 costs have amounted to $107 million, being 1.1% of total sales.
The company has started off well, but the rest of the year is difficult to predict. But Woolworths is expecting elevated buying for the rest of the first half of FY21.
The Woolworths share price is up 2.5% in reaction to this report. I’m not sure how much more Woolworths can grow over the rest of the year – it will be difficult to beat the sales in the second half when pantry stocking was rife. It’s not a bad business, but there are other ASX dividend shares with better longer term growth potential in my opinion like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
