Woolworths has slipped to a $1.235 billion full-year loss after a big decline in earnings from its Australian food and drink business and more than $2.6 billion of writedowns.
The supermarket giant slashed its final dividend after slipping from last year’s $2.146 billion profit on $2.628 billion of writedowns mostly related to its ongoing exit from the hardware sector and its underperforming Big W stores.
The drop was compounded by a 40.8 per cent decline in underlying earnings before interest and tax from Australian food and petrol to $1.76 billion for the 52 weeks to June 26.
“Sales improved over the year for our Australian Food business with comparable sales in the fourth quarter the strongest for the year driven by strong comparable transaction growth,” said Brad Banducci, CEO, Woolworths.
“However, underlying earnings from Australian Food and Petrol were down 40.8 per cent on last year, reflecting lower sales growth driven primarily by our investment in lower prices and a decline in items per basket.”
Woolworths, which slashed its dividend from 72 cents a year ago to 33 cents, made $1.873 billion of writedowns against its failed hardware businesses, which it will be rid of by December.
On Wednesday, it said it had agreed to sell its Home Timber & Hardware business to Metcash for $165 million by October, and would close all its Masters stores by early December.
“We are seeing early signs of progress as we work to restore our competitiveness and improve our culture in Australian Food,” said Banducci. “We have also addressed significant issues facing the Group with the decision to exit Home Improvement and decisive action taken on BIG W to reposition the business.”
Banducci reaffirmed that the retailer’s turnaround is a “three to five year journey” and will involve changes to the company’s culture.
“We appointed Colin Storrie as Group portfolio director in July to provide greater support and oversight of our portfolio businesses,” he said.
“We expect trading conditions to remain highly competitive in FY17 but are confident that we have a clear plan and set of priorities, and we are encouraged that we finished FY16 with some early signs of momentum.”
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