Woolworths share price on watch after ‘transformative year’
FY21 has been a significant year for Woolworths following its successful divestment of Endeavour Group Ltd (ASX: EDV). Key highlights include:
- Group sales rose 5.7% to $67,278 million
- eCommerce sales surged 58.1% to $5,602 million
- Group earnings before interest and tax (EBIT) increased 13.7% to $3,663 million
- Group net profit after tax up 22.9% to $1,972 million
- Final dividend of 55 cents per share
What happened to Woolworths in FY21?
The Woolworths share price has been a standout performer in wake of recent lockdowns and cycling through elevated sales from FY20.
In its results presentation, management said that “business was very different in H1 and H2” as the company cycled the impact of COVID-19 from late February onwards.
Australian Food FY21 sales increased 5.4% to $44.4 billion, with comparable sales increasing 4.2%.
H1 sales increased 10.6%, benefiting from COVID-related demand and the successful Disney+ Ooshies and glass containers campaigns. While sales in H2 increased by 0.2% as the business experienced COVID-19 pantry-loading in the prior year.
The company notes that sales in Q4 increased 1.2%, driven by elevated sales in May and June following coronavirus outbreaks in Victoria and NSW.
This might be a better outcome than what Woolworths previously forecasted in its half-year results, citing “we expect sales to decline over the March to June period compared to the prior year in all our businesses.”
Woolworths reported a material decline in pandemic-related costs on the prior year, and coupled with gross margin improvements, led to 4.5% EBIT growth in H2 and 9.0% EBIT growth before significant items for the full year.
Elsewhere, Big W achieved record annual sales of $4.6 billion, up 11.6% on the prior year, with all major categories experiencing strong annual growth.
While the company’s New Zealand food business experienced a 0.6% decline in total sales to $7.1 billion, cycling the strict COVID-19 lockdowns in H2 FY20.
Woolworths chair Gordon Cairns commented on the transformative year for Woolworths, following its successful Endeavour Group divestment and focus on growth.
We have also continued to invest in our existing business, spending $2 billion on sustaining and growth capex in F21. We will invest what is required to ensure that we are able to meet the expectations of customers whether they shop in store or online.
An example is our investment in eCommerce over many years which has helped to drive sales of over $5.5 billion this year. Despite this increased investment, normalised Group ROFE increased 1.4 points during the year to 15.1%.
Cairns said the company was also conducting a $2 billion off-market share buy-back and “declared a second-half dividend of 55 cents per share, bringing our full-year dividend to 108 cents per share, a 14.9% increase on F20. Endeavour Group is also expected to pay a dividend relating to H2 as previously communicated in the demerger booklet.”
What’s next for Woolworths?
Woolworths was unable to provide any guidance for FY22 earnings.
The Woolworths share price will go ex-dividend on Thursday, 2 September for a 55 cent final dividend.
Investors will receive this dividend on Friday, 8 October.