The Woolworths Group Ltd (ASX: WOW) share price is up 2% after reporting its FY24 result.
Woolworths supermarkets make most of the revenue, but it also has New Zealand Countdown supermarkets, the retailer BIG W, a business to business (B2B) division, Petstock and other businesses.
Woolworths FY24 result
Here are some of the highlights from the result for the 53 weeks to 30 June 2024:
- Group sales rose 5.6% to $6.7 billion
- Underlying EBITDA climbed 5.4% to $6 billion
- Underlying EBIT rose 3.4% to $3.2 billion
- Underlying net profit declined 0.6% to $1.7 billion
- Statutory net profit sank 93% to $108 million
- Final dividend down 1.7% to $0.57 per share
- Full-year dividend up 38.5% to $1.44 per share
The statutory profit declined so much because of $1.6 billion of significant items, including the New Zealand food division being impaired by $1.5 billion – which is an accounting change to reduce the balance sheet value of the division.
Woolworths also included other items in its statutory profit, including a $209 million decline in the value of its Endeavour Group Ltd (ASX: EDV) shares.
The company’s FY24 numbers benefited from the extra week in FY24 compared to FY23.
The business also reported that total e-commerce sales increased by 20.8% year on year to $7.96 billion, representing 12.5% of total sales (up from 11% in FY23).
Looking at the performance of the individual segments:
- Australian food sales rose 5.6% to $50.7 billion and EBIT increased 8.6% to $3.1 billion
- Australian B2B sales increased 6.1% to $4.6 billion and EBIT rose 92.7% to $122 million
- New Zealand food sales increased 3.2% to NZ$8.17 billion and EBIT dropped 56.5% to NZ$108 million
- BIG W sales fell 2.1% and EBIT sank 90.4% to $14 million
- ‘Other’, including Petstock, sales were $356 million and it reported an EBIT loss of $123 million
The company reported that its supermarket sales growth slowed as inflation and item growth moderated.
BIG W suffered from customers reducing their discretionary spending and trading down in a highly competitive industry. Home and clothing sales declined amid increased promotional and clearance activity. Sales trends improved over the fourth quarter due to “price investment”, meaning lower prices.
Outlook for the Woolworths share price
In the first eight weeks of FY25, Australian food sales were up 3% driven by item growth and modest inflation, with e-commerce being a key contributor. A tough environment is expected to continue, as well as ongoing inflation for costs including wages.
New Zealand food sales were up 1.5% in the first eight weeks, driven by item growth, and EBIT is expected to be above FY24, though it will “take time for the business to return to its full earnings potential”.
BIG W sales in the first eight weeks of FY25 were “broadly flat”, with a reduction in the average selling price. FY25 EBIT is expected to be above FY24.
Woolworths is a strong business with an enviable market share in Australia. I don’t think it’s going to grow strongly, but if revenue and underlying earnings keep growing, it could remain positive for shareholders.
It has gained close to 20% since May, so I wouldn’t call it a great buy right now. But, it could remain a solid blue-chip for some time. There are other ASX dividend shares I’d buy first though.
