ASX-listed supermarket giant Woolworths has reported a major profit reduction in its full year results for FY20, largely under the weight of the ALH portfolio being closed for months.
Woolworths Group (ASX:WOW) chief executive Brad Banducci offered that earnings had been “distorted” by COVID-19 in the second half of the financial year.
Despite “materially higher” costs around safety for customers and employees, strong supermarket sales-driven EBIT growth was seen across retail businesses.
Total sales rose 8.1 per cent to $63.7 billion, but earnings dipped 0.4 per cent to $3.2 billion as the 330+ pub venues and gaming rooms were forced closed. Overall net profit fell 21.8 per cent on last financial year to $1.16 billion, being 1.82 per cent of earnings.
Similarly bolstered by the shifted trading conditions, Woolworth’s liquor division Endeavour Group saw total earnings increase 5.7 per cent, but the coupled hotels division earnings plummeted 51 per cent; FY20 EBIT was $172 million versus $351 million (normalised) in 2019; H2 EBIT was negative $52 million, against a normalised 2019 figure of $144 million (down 136 per cent).
“The closure of hotels for much of the last four months of the financial year led to a material decline in second-half earnings (EBIT) compared to the prior year,” noted Banducci.
An unforeseen result of the merged hotels and liquor divisions and planned spin-off announced last year was ALH subsequently not qualifying for JobKeeper payments for its staff, as Endeavour Group as a whole had not seen the required 30 per cent reduction in turnover.
Also benefitting from pandemic-induced trends, the group’s online sales jumped 41.8 per cent to $3.5 billion, now representing 5.49 per cent of total turnover.
WOW paid a full year dividend of 94cps, which was 7.8 per cent lower than the prior year, although it claims this reduction is consistent with FY19 when excluding non-recurring earnings from the divested Petrol division.
WOW share price closed yesterday at $40.38 – up 18.2 per cent on a low of $34.16 on 22 May, and up 90.38 per cent on a five-year low of $21.21 seen in June 2016.