The Australian business of JSE-listed retail giant Woolworths has knocked the overall full-year turnover performance of the Cape Town-headquartered group, according to its latest results published on Wednesday.
Stricter Covid-19 lockdowns in the first half of its financial year down under were largely to blame, leading to Woolworths reporting group-wide turnover and concession sales increasing by a modest 1.4% (or 2.6% in constant currency terms) for the year to 26 June 2022.
This is much lower than many of its locally listed retail peers such as Shoprite, Pick n Pay, TFG and Truworths.
Despite the single digit growth in turnover, Woolworths’s South African and African operations boosted its overall performance on the back of less severe Covid restrictions in these regions.
Its food business, however, saw reduced ‘eat-from-home’ demand as the economy opened up.
The local and rest of Africa operations together account for most of the group’s turnover. And this is what largely saw the group’s total full-year dividend nevertheless rocketing 247.7% to 229.5 cents per share (FY2021 – 60cps).
Commenting on its Australian and New Zealand operations, Woolworths noted: “As mentioned previously, trade in H1 was significantly impacted by government-enforced restrictions across the region which required the closure of stores representing more than 70% of our brick-and-mortar sales for an extended period.”
It however added: “In H2, strong consumer demand and our focus on trade resulted in a healthy rebound in sales.”
Woolworths reported that turnover and concession sales at Australian-based David Jones (DJ) declined by 2.6% for the full year and by 2.5% in comparable stores.
In the second half of the year DJ’s turnover and concession sales grew 4.3% “after the easing of lockdown restrictions”. However, that was not enough to see overall full-year gains at the unit.
Woolworths has had a tough time operating the DJ clothing chain in Australia and the business took a further hit from Covid-19 restrictions to trade over the past two years.
As a way to manage the situation, Woolworths has moved to reduce its footprint in the country, reducing its trading space by 2.6% in the latest period as part of its “space optimisation” strategy.
“For the full year, adjusted operating profit declined by 0.6% on the prior year to A$83.7 million, returning an operating profit margin of 4.1%, compared to 4.0% in the prior year.”
“This was achieved despite Covid-19 related government support and rent concessions in the prior year base,” the group said in its Sens statement.
Meanwhile, the food, clothing and homeware group declared a final dividend of 149 cents, a 125.8% increase on that declared in the prior year, boosted by an improved group trading performance in the second half.
Headline earnings per share (Heps) grew by 6.5% to 398.9 cents this period, up from 398.9 cents in the prior period.
The easing of lockdown restrictions across its operations during the period contributed significantly to creating a better trading environment in the second half, helping the group focus on executing its strategic objectives, Woolworths said.
A reduction of trading space by 4.5% of its fashion, beauty and homeware (FBH) during the period has according to the retailer supported a double-digit increase in trading densities for the segment.
The FBH business has seen noticeable turnover improvement with turnover and concession sales rise by 6.5%, this as the move back to the office intensifies in the country.
“Adjusted operating profit increased by 48.7% to R1 610 million, resulting in an operating margin of 11.9% for the year, compared to 8.4% in the prior year.”
The food business has maintained growth this period – even if muted in comparison to other grocery retailers – reporting a 4.6% rise in turnover and concession sales.
Woolworths says the growth of the food business this period needs to be viewed in the context of the return to out-of-home consumption – an increasingly competitive environment – as well as the impact of the high base it saw in prior years.
Like its competitors, the group has also reported managing price increases, keeping product inflation across its key categories low to shield the consumer from the rising cost of living.
“Price movement averaged 3.5% for the full year, with underlying product inflation at 3.9%, reflecting continued price investment.”