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Published
Aug 25, 2016
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South African retailer Woolworths reports 8.9 pct rise in FY profit

By
Reuters
Published
Aug 25, 2016

Woolworths Ltd, Australia's biggest grocer by sales, posted its first annual loss since listing and slashed its dividend following write-offs from an ill-fated hardware business that had become a major drag on earnings.


Woolworths


The company on Thursday reported a net loss of A$1.2 billion ($913.6 million) for the year to June 26, compared with a net profit of A$2.1 billion the previous year. The loss included a one-off charge of A$1.8 billion to quit a hardware joint venture with U.S.-based Lowe's Companies Inc.

The 92-year-old company's shares jumped 7 percent in early trading, in a weaker overall market, as investors cheered the exit from the loss-making Masters hardware chain. The stock is still down 10 percent from a year ago.

"We expect trading conditions to remain highly competitive in FY17 but are confident that we have a clear plan and set of priorities," said Chief Executive Officer Brad Banducci, who started in the role this year after his predecessor quit amid controversy over the hardware venture.

The result underscores the multiple pressure points on a company long seen as resilient to economic volatility: Australia's home improvement market was not big enough to accommodate it, while new competition from budget grocery players like Germany's ALDI Inc has hit its supermarkets.

A foray into fuel sales via a partnership with service station operator Caltex Australia Ltd has also led to a strain on earnings since the global oil price sent bowser prices plummeting.

Analysts viewed the hardware business as a key reason it was unable to compete on supermarket prices with new cut-price European rivals and its domestic peer, Wesfarmers Ltd-owned Coles.

Sales of food slipped 0.2 percent to A$34.8 billion, reflecting the company's moves to cut shelf prices and win back market share.

In a sign the supermarket war is not just hurting Woolworths, a day earlier Wesfarmers posted its worst profit in 15 years, partly due to grocery price cuts.

Woolworths petrol sales slumped 18.1 percent.

Woolworths declared a final dividend of 33 cents, down from 72 cents the previous year.

$1 = 1.3135 Australian dollars
 

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