Woolworths Group Ltd (ASX: WOW) has reported its sales for the first quarter of FY21.
Solid first quarter for Woolworths
The supermarket giant reported that its group sales went up by 12.3% to $17.9 billion.
You may not be surprised to learn that its group e-commerce sales soared higher by 86.7% to $1.5 billion.
Let’s look at the individual segments.
Australian Food sales went 12.9% higher to $12 billion. New Zealand Food sales grew by 4.7% to AU$1.7 billion, in New Zealand dollar terms sales went up 6.9% to NZ$1.88 billion.
Big W sales jumped 20.4% to $1.1 billion. Endeavour Drinks (which includes Dan Murphy’s) saw sales go up by 21.4% to $2.65 billion whilst Hotels revenue fell 33.2% to $313 million.
Woolworths was very happy with the success of its Disney+ Ooshies program where certain purchases was rewarded with little Disney Ooshie characters like Darth Vader, Woody, Iron Man and Captain America.
Looking at some of Woolworths’ operating metrics. There was an interesting trend where the number of transactions dropped 9.3%, but the number of items per basket went up 15.8% – people seem to have done fewer shops but bought more when they did.
Food deflation slightly returned with average prices excluding tobacco falling by 0.2%.
Woolworths said that its Woolworths e-commerce sales had grown by 100% compared to a year ago, up to $961 million. E-commerce penetration was 8%, up from 4.5%. Its average weekly digital traffic grew by 75.5% compared to a year ago.
Staff remediation
Woolworths said that in the first quarter of FY21 it paid $164 million to correct salary shortfalls. That’s on top of the $117 million paid in FY20. It’s expecting to finish repayments by the end of the first half, though it may not be completed for Dan Murphy’s and BWS staff.
Management comments
Woolworths CEO Brad Banducci said: “It has been a pleasing start to FY21 with all retail businesses delivering strong sales growth and customer metrics remaining solid. COVID costs remain material as we continue to prioritise the safety of our customers and team but have moderated as we become more efficient at operating COVIDSafe.
Time to buy Woolworths shares?
Christmas will be an important trading period, as it always is. But it will be interesting to see how the business performs during the next couple months. Both from an economic point of view and how COVID-19 impacts its operations.
Mr Banducci revealed that in October, Australian Food comparable sales growth was in the high single digits.
So the FY21 first half result could be strong, though the second half of FY20 will be hard to beat due to the COVID-19 pantry stocking.
Woolworths seems like a highly priced defensive business with limited profit growth prospects after this half as the country returns to normal. There are other ASX dividend shares I’d rather buy first like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
