Stronger margins push first-half profits up for Woolworths as Covid costs fall
Woolworths has posted a sharp jump in first-half profit on the back of stronger margins in its main supermarkets business and lower Covid-related costs.
Woolworth has enjoyed higher first-half profits thanks to margins and a drop in Covid costs. (Pix: The New Daily)
The retail giant said net profit from continuing operations for the half year rose 24.9 per cent from a year ago to $845 million.
However profit fell sharply on a statutory basis because last year’s number included gains on the demerger of drinks group Endeavour.
Overall sales for the 27 weeks ended January 1 were up 4.0 per cent to $33.17m.
“Our first half result benefitted from a focus on improving our customer shopping experience, restoring our operating rhythm, the non-recurrence of material Covid costs in the prior year and strong seasonal trading,” Group CEO Brad Banducci said.
The gains were led by its core Australian supermarkets business, which saw sales rise 2.5 per cent to $24.39 billion, while earnings before interest and tax jumped 18.2 per cent to $1.44b thanks to food margins rising 48 basis points in the half to 30.7 per cent.
The company said price growth averaged 7.7 per cent in the second quarter despite some fruit and vegetable prices moderating as supply improved. Rival Coles had outlined first-half food inflation of 7.4 per cent on Tuesday.
Woolworths’ other major gain came from a recovery at its Big W discount chain, where half-year sales jumped 15.3 per cent to $2.7b and earnings surged four-fold to $134m.
Sales at its business-to-business segment and New Zealand operations rose 23 per cent and 1.3 per cent respectively.
Banducci said Woolworths has had a strong start to the second half but warned that inflation is impacting customer shopping behaviour.
“Inflation is continuing to affect the way that customers shop but the overall impact on our business at this stage remains modest,” he said.
“We remain focused on ensuring that our customers get their Woolies worth through our Prices Dropped and Low Price programs, various specials, personalised Everyday Rewards offers, and ranges tailored to meet the needs of specific stores and communities.”
Food sales at its Australian supermarkets were up 6.5 per cent in the first seven weeks of the second half, while Big W sales were up 9.7 per cent.
The company has lifted its fully franked interim dividend to 46 cents a share, an 18 per cent from 39 cents a year ago.
