Woolworths profits shoot up as it dumps David Jones – and locals flock to Woolies Food

Woolworths has seen a strong financial performance for the 52 weeks ended 30 June 2023, despite a rise in credit impairments.

The group reported total group turnover up 7% to R85.7 billion for the period, with profit before tax up 29.5% to R6.7 billion.

A large reason for the improved financial performance of Woolworths is the sale of embattled Australian retailer David Jones.

While the impact of the David Jones sale on the company’s finances is reflected in a lower revenue performance versus 2022 (R72.7 billion versus R82.3 billion – restated as R65.7 billion when reflecting the disposal), the group reported a much stronger gross profit performance (R5.1 billion versus R3.7 billion).

“The disposal of David Jones is a major milestone in repositioning our group for growth. As a result of this transaction, we have unlocked R7.7 billion in value for shareholders since 2022, and more importantly, can now reallocate both our capital and management attention towards the more value-accretive initiatives across the group’s core Woolworths and Country Road Group businesses,” Woolworths said.

Attributable headline earnings after tax were recorded at R4.74 billion (2022: R3.83 billion).

Across the group’s entire operations, earnings per share (EPS) increased from 381.4 cents in FY22 to 542.0 cents in FY23, whilst headline earnings per share (HEPS) grew from 398.9 cents to 514.7 cents.

Thus, the board upped its total dividend by 36.4% from 229.5 cents in FY22 to 313.0 cents in FY23:

Woolworths Food

Despite the issues caused by load shedding, the group’s Food business grew turnover and concession sales by 8.5% and 6.3% on a comparable store basis.

The group said that growth accelerated to 9.4% in H2 (7.2% in comparable stores) due to the increased footfall and enhanced availability.

The group’s price movement was 8.3%, lower than the underlying product inflation of 9.9%.

The further rollout of Wollies Dash saw online sales increase by 28.5% and contribute 3.8% of South African sales.

The group’s Food business saw its gross profit margin increase by 40bps to 24.4%, despite the impact of load shedding on waste and supply chain costs, the growth in online sales, and the ongoing investment in price.

Overall, the Food business saw operating profit grow by 2.9% to R2,976 million.

The group’s Fashion, Beauty, and Home businesses also saw operating profit increase by 21.3% to R1,953 million, with the group’s turnaround strategy gaining traction, leading to an 8.9% increase in turnover.

Unlike David Jones, Australian-based Country Road saw strong growth in full-price sales, which increased operating profit to 25.6% to A$151.0 million (R1.8 billion).

The Woolworths Financial Services (WFS) book also reflected a 14.5% increase, driven by new accounts and credit card advances.

“The impairment rate for the 12 months ended 30 June 2023 was 7.3%, compared to 4.7% in the prior year, reflective of increased pressure on consumers in the current macroeconomic climate,” the group said.

Outlook

“We are confident in our ability to deliver against our strategies, notwithstanding the challenging macro backdrop,” group CEO Roy Bagattini said.

“We have a robust balance sheet and a simplified group structure post the sale of David Jones, and are well positioned to leverage our strengthened foundation to not only optimise and grow our businesses, but to permanently change the value creation profile of our group.”

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