Woolies expects first-half headline profit to drop by up to 40%

Woolies expects first-half headline profit to drop by up to 40%

20 January 2022 | Retailer trading results

Woolworths (Woolies) expects first-half headline profit to slump by up to 40%, with lockdown restrictions in Australia and civil unrest in SA hitting sales.

In an updated trading statement on Thursday, Woolies said trading momentum had showed signs of improvement across all divisions over the last six weeks of the review period, except the fashion, beauty and home division. Black Friday promotions, festive season trade and the lifting of restrictions in Australia boosted sales.

However, group turnover still dropped 2.1% and 0.3% in constant currency terms in the 26 weeks to end-December from a year earlier.

Online sales grew 22.4%, contributing 13.7% to the group’s total turnover and concession sales.

Its food business, which has been a star performer for a number of years, grew turnover 3.8% and comparable stores sales rose 2.8%, with the retailer saying the low single-digit sales numbers should be viewed in the context of the high base set in the prior comparable period when home consumption spiked due to Covid-19-related dynamics.

Online sales for the food division increased 55.8%, contributing 3.1% of SA sales, while trading space grew by 2.2% relative to the prior period.

The fashion, beauty and home division, which has been struggling for a while, managed to grow turnover 4.2% and 4.7% on a comparable basis, but the company said trading momentum slowed in the last six weeks of the review period primarily due to womenswear performing below expectations.

Online sales grew 19.2%, contributing 4.4% of SA sales, while the ongoing execution of space reduction initiatives reduced the footprint by 6.1% relative to the prior period, resulting in improved trading densities.

The Woolworths financial services net book grew 5.3% year on year to the end of December 2021, compared to a 7.8% contraction as at December 31 2020, reflecting the recovery in consumer spend.

In Australia, department store chain David Jones reported a 9.2% decline in sales, with comparable store sales dropping 9%, affected by extended lockdown restrictions. Trading space reduced by a further 5.8% year on year, while online sales rose 44.2% and contributed 28.1% to total sales.

Country Road Group sales declined by 3.1% and by 3.2% in comparable stores for the half. Online sales increased 3.6% and contributed 33.8% to total sales during the period, while trading space reduced by 7.4%.