- Supermarket giant Woolworths (WOW) posts a $1.62 billion profit for FY23
- The company also achieved group sales of $64.3 billion in FY23, a 5.7 per cent increase on FY22
- However, like its competitor Coles, Woolworths is also facing higher OpEx costs, increased theft, and an uncertain FY24
- The company also noted inflationary pressure will remain on goods in some categories
- Woolworths announced a final dividend of 58 cents
- WOW shares are up 4.94 per cent, trading at $38.01 at 12:23 pm AEST
Woolworths Group (WOW) has released its annual report for FY23, disclosing profits, ongoing retail chain expansion, and increased margin growth, mirroring the recent announcement made by its primary competitor, Coles (COL), as reported yesterday.
The supermarket giant announced that after-tax profit was up 4.6 per cent on FY22 to $1.62 billion for FY23.
In FY23, Woolworths served an average of 24.5 million customers in-store each week. As of June 2023, Woolworths boasts 1460 stores in Australia.
These stats helped drive group sales to $64.3 billion in FY23, marking a 5.7 per cent increase over FY22.
The Australian Food division, responsible for running Woolworths stores, led in revenue at $48.04 billion, while Big W had the lowest impact at $4.78 billion. Electronic commerce sales contributed $6.59 billion.
All in all, group earnings before interest and tax (EBIT) were significantly higher in FY23 than FY22, logging $3.11 billion compared to $2.69 billion the previous year.
“Group NPAT before significant items of $1721 million increased 13.7 per cent compared to last year, with profit growth reflecting a more stable operating environment, the absence of COVID costs, and ongoing investment in the business over many years,” the company wrote.
With this 13.7 per cent jump under its belt, Woolworths has declared a fully franked final dividend of 58 cents, up 9.4 per cent from FY22.
However, just like its major rival, Woolworths is also grappling with increased operating costs, heightened stock loss from theft, and an uncertain operating environment going forward where inflationary prices are expected to persist in a mixed fashion across some categories.
The group’s chief, in the annual report preface, stated that the company will continue to address the cost of living crisis in a manner that enhances revenue while also tackling challenges faced by Australians.
However, the company is not immune to these challenges either. The cost of doing business as a percentage of sales has increased by 8 basis points (bps) from FY22 to 21.9 per cent, primarily driven by wage increases, although easing inflation has improved sales growth.
Similar to Coles, Woolworths is also contending with an uptick in theft.
While Woolies’ margins increased notably by 51 bps from FY22, reaching 26.8 per cent, the supermarket chain noted that theft partially offset stock loss, but not enough to counterbalance the decline in COVID-related costs.
Nevertheless, the prominent Australian retail giant paints a picture of Australia returning to normalcy. Online sales have decreased from the COVID era as consumers continue to prefer in-store shopping.
However, the question remains whether the sharp drop in discretionary spending in Q4 will continue to reverberate.
In this context, a closer look at the detailed results for Big W stores provides insight into the behaviour of Australian consumers.
“Big W’s total sales were up eight per cent in F23 to $4.78 billion,” the company wrote. But Q4 of FY23 saw a rapid drop off in the clothing and home categories as cost of living pressures continue to bite into 2023.
“The decline in Q4 of 5.7 per cent due to a notable softening in discretionary spend [was recorded.]”
However, Woolworths pointed out that for Big W, categories such as health, beauty, infant, and pet products continue to grow. Surprisingly, so does leisure, including books, electronic gaming, and travel goods.
WOW shares were up 4.94 per cent, trading at $38.01 at 12:23 pm AEST.
