Woolworths FY20 Results (ASX: WOW)

Woolworths FY20 Results (ASX: WOW)

Woolworths (ASX: WOW) has reported its full-year results for FY20. We take a look at the company’s headline figures, key commentary and guidance outlook, plus review the share market’s reaction across the trading day.

 

Headline result

Woolworths’ Group sales grew by 8.1% (normalised) year-on-year, reaching $63.7 billion.

Meanwhile, normalised Group NPAT declined 1.2% to $1.6 billion, with EBIT down 0.4% to $3.2 billion.

The Board has declared a fully-franked final dividend of 48 cents per share, bringing the company’s total dividends to 94 cents. Although total FY20 dividends are down 7.8% on the year prior, the amount is in line with FY19 if non-comparable petrol earnings and the impact of an additional trading week are stripped from the prior corresponding period. Shares in WOW will trade ex-dividend on September 1, 2020.

The market was buoyed by the company’s results today, with shares ending the session 2.8% higher and near their high for the day.

 

Key commentary

EBIT growth was weighed down by COVID-19 in the second half of the financial year, having grown 11.4% across the Group in the first half. While the company’s core retail operations benefitted from panic buying and pantry-loading, Woolworths’ hotels division was hit hard as the company was forced to close its hotels for the last four months of the financial year.

Online sales penetration through WooliesX increased notably throughout the fourth quarter, reaching 6.3%. That comes in light of some of the logistical bottlenecks and stocking issues that the company experienced around late March.

The New Zealand Food division managed to outperform in terms of sales and EBIT growth, with second-half EBIT growth of 15.1% and full-year EBIT growth of 10.7%. The nation’s strict lockdown measures were a driving factor in the result due to heightened pantry stocking, when at the time, Australia’s lockdown controls were more modest in nature.

After a period of difficulty, BIG W provided a positive contribution to Woolworths’ results, delivering $39 million EBIT in FY20. Sales dipped at the height of the first lockdown around the country, but picked up strongly in the fourth quarter, particularly through the online channel.

It was a case of mixed results for the Endeavour Group. The division’s exposure to liquor sales gained momentum from late March, however, as alluded to earlier, hotel venues were hurt by closures. Hotels EBIT slumped 51% in FY20.

Finally, a host of expenses weighed on the company’s statutory results, including additional customer and safety expenses associated with COVID-19, the impact of salaried team member remediation costs, NSW supply chain transformation costs, and Endeavour Group transformation costs.

 

Guidance outlook

In early FY21 trading thus far, Woolworths has noted sharp sales growth across each of its divisions bar hotels, where closures continue to drag on the company. Group sales were up 12.4% across the first 8 weeks of the new financial year, while Group online sales have skyrocketed 84.6% relative the same period last year. Management still anticipate on divesting the Endeavour Group in calendar 2021.

Given the broader uncertainty associated with COVID-19 and the economic landscape, the company has not forecast any explicit guidance for FY21. Management, however, has outlined expectations that the trading environment will remain “challenging” and that there will be some level of elevated sales and costs across the remainder of H1 FY21.

 

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