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The Woolworths Group Limited company has reported solid operational and financial results. Positive results and a healthier balance sheet have resulted from control actions to increase trade, manage margins, limit expenses, and repay debt (Parkinson, 2018). Comparing the 2020 half-yearly report (ended December 31, 2020) and the latest annual report (ended June 30, 2020), consolidated sales and concession sales climbed by 9.7% and grew by 5% at a 9.0% constant exchange rate.
Profit per share (EPS) was 435.1 million, up from 58.2 million in the previous year, while profit per share (HEPS) and adjusted diluted HEPS increased 212.5% and 102.9% year-on-year, respectively. Due to the widespread impact of the pandemic, the transaction status for the fiscal year cannot be compared directly with the previous year. Group-wide trade continued to improve despite uncertainties and business disruptions exacerbated by delays in the introduction of the COVID-19 vaccine, further outbreaks in New Zealand and Australia, and related lockdowns (Andrabi, 2020). Combined with strong working capital management and revenue from the sale of real estate in Australia, improved transaction performance led to positive cash flow and significant group-wide net debt reductions (Kasanagottu & Bhattacharya, 2018). Profit per share (EPS) was 435.1 million, up from 58.2 million in the previous year, while profit per share (HEPS) and adjusted diluted HEPS increased 212.5% and 102.9% year-on-year, respectively, to 37440 million.
Sales and concessions sales increased 5.7% in comparable markets and increased 6.9% this year. Woolworths Food was able to increase market share and volume during the reporting period, despite the strong foundation established the previous year for hoarding before the first shutdown (Van Kampen et al., 2020). Given that the inflation rate of the underlying product is 4.9%, price volatility was 5.2%, but the net area increased by 0.6%. Sales in the second half increased by 3.2%, compared with 16.9% in the previous two years. Woolworths continues to focus on product quality, innovation, and ease of use while investing in pricing in key product categories to enhance its value proposition.
The expansion of the click and collect service and the introduction of Woolies Dash, an on-demand delivery service, contributed to this. Online sales increased 117.9% year on year, accounting for 2.3% of South Africa’s total grocery sales (Taplin, 2021). The gross margin was 24.5%, 0.4% lower than the previous year, as increased price investment and increased online contributions were offset somewhat by volume discounts and savings in sales costs (Louw, 2019). Spending increased by 6.1%, including the increase in costs associated with COVID-19. Adjusted operating profit increased 3.9% to R39 million, and after the introduction of IFRS 16, the operating margin for the year was 8%.
As of the end of June 2021, the Woolworths Financial Services books increased 0.7% year-on-year (2% as of June 30, 2020). The impairment rate for the 12 months ending June 30, 2021, was 5.3%, up from 7.9% in the previous year. This shows the basic strength of the book, as well as the focus on customer bailout and debt collection. The annual surplus after tax increased by 16.8% to 118 million. A stronger economic approach, consumer confidence, and travel bans in Australia have boosted domestic and retail spending. Despite regular blockades in major cities, there was a three-month blockade in Victoria earlier this year and another in the final quarter. The number of people roaming the central business centres and airports is still well below pre-COVID-19 levels.
References
Andrabi, H. R. S. Does It Pay to Read the News? News-sentiment and Volatility of Financial Market Returns.
Kasanagottu, S., & Bhattacharya, S. (2018). A Review of Metro, Target, & Woolworths Global Business Strategy. International Journal of Mechanical Engineering and Technology, 9(7), pp. 293-302. Web.
Louw, S. (2019). When the forecast is wrong-company results.finweek, 2019(4), p. 18-18.
Parkinson, M. M. (2018). Case Study 4: Woolworths Group plc. In Corporate Governance in Transition, pp. 203-221. Palgrave Macmillan, Cham.
Taplin, R. (2021). ESG and good corporate governance in relation to the use of pension funds: Comparison between the United Kingdom and South Africa (The Report). Interdisciplinary Journal of Economics and Business Law, 10, pp. 1-46.
Van Kampen, T., & Kirkham, R. (2020). Assessment of the Supermarkets and Grocery Stores Sector in Australia: A Case Study of Woolworths and Coles using DEA and VAIC™. The Journal of New Business Ideas & Trends, 18(1), pp. 1-11.
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