Woolworths has released annual results for FY19 with sales from continuing operations up 3.4% to AU$59,984m, but EBIT including significant items from continuing operations down 9.6% to AU$2,353m.
Australian food sales up 3.3% to AU$39,586m
Sales grew 3.1% on a LFL basis, while EBIT was up 3.8% to AU$1,857m. Sales growth was driven by a 1.8% growth in transactions and an increase in items per basket of 1.7%. Supermarkets saw sales momentum improve in H2 with strong growth across a number of fresh categories. Average prices declined 0.4% during the year, however sales would have been aided by the return of price inflation in Q4 of 0.5% due to the impact of drought conditions in Australia. Sales in H2 also benefited from the successful Disney Words and Earn & Learn marketing campaigns. Although overall promotional penetration declined for the year, due to a reduction in the number of promotions, and the number of products on the Always and Prices Dropped programmes stabilised versus FY18.
Solid progress against strategy...
Woolworths made strong progress against its strategy, with a number of highlights:
- Metro continued to grow strongly - at the end of the year the retailer had 43 Metro and 16 small Woolworths supermarkets operational under the Metro team. Improvements to price, promotions and range were made through the year, with a new extra-small format tested in Kirribilli, Sydney
- Australian food online sales grew 31% to AU$1.4bn - online penetration hit 4.1% in Q4 2019, due to strong growth in Pick Up (click & collect) and improvements to website navigation and speed. Expansion of multiple fulfilment models is helping to satisfy customer needs; Delivery Now (on-demand delivery) was expanded to 38 stores across Sydney, Melbourne and Brisbane, while Drive thru and Drive Up was rolled out to a further 112 locations
- Sales densities improved by 2.0% - Woolworths continued to develop its store network with 1,024 supermarkets and Metro stores trading at year end. It opened 21 new supermarkets and three Metros, refurbised 68 stores and closed eight shops during the year
New Zealand Food sales up 2.4% to NZ$6,712m
Sales grew 3.4% on a LFL basis, while EBIT was up 1.0% to NZ$296m. Average prices declined 0.8% during the year, with lower deflation in H2. Despite this, sales growth improved in H2, driven by positive transaction growth and improvements to its fruit and vegetable offer resonating well with customers. Sales densities improved by an impressive 4.5%, aided by a 2.0% reduction in space, during the year three stores closed and two were opened, taking the portfolio to 180 Countdown stores. Online was also a highlight, with sales growth of 40% to NZ$455m for the year and penetration up from 6.4% in Q1 to 7.7% in Q4. This was driven through Pick up (click & collect), same day delivery and capacity expansion.
Endeavour Drinks sales up 3.2% to AU$8,657m
Sales grew 2.3% on a LFL basis, while EBIT was down 9.7% to AU$474m. Woolworths said that the liquor market remained subdued through the year, with volume declines being offset by price and sales mix improvements (e.g. premiumisation). Sales growth improved in H2 in both BWS and Dan Murphy's stores. Online liquor sales for the year were AU$503m, with penetration in Q4 hitting 6.0%.
BWS stores continued to trade well, with a focus on localised ranges and tailored Woolworths Reward offerings. Online sales grew by double digits, supported by On Demand now being available in 605 stores and Jimmy Briggs (on demand service) expansion to Brisbane, Gold Coast, Canberra and new areas of Sydney and Melbourne. BWS opened 30 net new stores in the year, taking the network to 1,346 shops. The in-store experience at Dan Murphy's was enhanced through wine experts being introduced to select stores, plus three net new store openings for the year. Online sales saw double digit growth, driven by new ranges, the roll out of On Demand to 91 stores and 30 minute Pick up (click & collect) to all stores.
Strong start to FY20 and five areas of focus...
The retailer flagged five areas where it has more to do against its strategy:
- Maintaining customer focus while prgressing its strategy
- Delivering increased convenience for customers via digital, online fulfillment models, Metro and Fresh Made easy
- Continuing to use technology to improve process and build partnerships
- Deliver cost efficiencies
- Complete the merger of Endeavour Drinks and ALH and the spin off of Endeavour Group
Linked to point three above, some exciting developments to watch over the next twelve months will be the retailer's first smart store at Gregory Hills, NSW, its expansion of Scan & Go to an additional five stores, plus the roll out of three micro fulfillment centres via its new partnership with Takeoff Technologies. Brad Banducci, Woolworths Group CEO, described the past 12 months as a 'challenging but rewarding year' and that the 'consumer environment remains uncertain'. Despite this the retailer is well placed and has carried momentum into the new year with LFL sales growth of 7.5% for the first eight weeks, reflecting lower sales growth for the same period in FY19 and the success of its Lion King collectables promotion.