Performance improvement across Woolworths Group resulted in an $859 million net profit in H1 F26, up 16%. However, when taking into consideration the $485 million set aside to remediate underpaid staff members following last year’s Federal Court ruling and other significant items, the Group’s, net profit fell 49% to $354 million.
Despite this, shares in Woolworths have had their best day on record, surging 13% to $35.63 following its half year presentation.
Strategic progress
Woolworths Group CEO, Amanda Bardwell, said the Group is “making progress” on strategic priorites outlined in August, having invested in value, fresh, on demand convenience and in-store execution.
“All customer metrics have improved, trading momentum is stronger and we are seeing market share stabilise,” she said.
Woolworths Group Chair Scott Perkins said the Group’s focus on retail fundamentals and simplifying the business to bring greater performance accountability is leading to greater stability and an improved financial performance.
“While the momentum we observe across the Group is pleasing, we are even more intently focused on demonstrating competitive advantage in a rapidly changing world to deliver long-term sustainable growth,” he said.
Performance overview
Australian Food sales increased by 3.6% in the half with Woolworths Food Retail sales (ex industrial action impacts in the prior year and Tobacco) increasing by 4.3%. Sales momentum improved in Q2 with strong eCommerce growth and improved in-store item trends. Australian Food H1 EBIT increased by 9.9% (3.5% ex IA and supply chain transition costs) with the EBIT margin up 32 bps and eCommerce and Media, Rewards and Services contributing strongly to the improvement.
In New Zealand Food, EBIT increased 22.4% compared to the prior year following progress on its ongoing transformation. Australian B2B sales increased by 4.9% with EBIT up 14.6% with double-digit earnings growth from PFD and PC.
W Living sales increased by 2.7% with EBIT up 186%, reflecting a more profitable half for BIG W driven by an improved clothing performance; strong Petstock growth; and a reduction in losses attributable to WMP including the closure of MyDeal in the half.
Supermarkets
Woolworths Food Retail total sales in H1increased by 3.5% (5.2% ex Tobacco) with improved sales momentum in Q2 after more subdued growth in Q1. Excluding IA, Woolworths Food Retail sales increased 2.6% in H1(4.3% ex Tobacco) with growth of 3.1% (4.7% ex Tobacco) in Q2 driven by stores and eCommerce. Excluding IA, Woolworths Supermarkets (store-originated) sales increased by 0.6% in H1 withQ2 sales increasing by 1.2% as item growth improved.
By category, Fresh sales grew 5.3% (ex IA) in H1 driven by Fruit & Veg and Everyday Chilled. Grocery Food grew 5.5% (ex IA) with strong growth in Drinks, Snacking and Health & Wellness. Sales growth in Everyday Needs, including Pet and Baby, remained more subdued but improved modestly in Q2. Tobacco sales declined by 49% on the prior year.
Own and exclusive brand sales increased 4.4% in H1 with growth in Grocery Food and Fresh partially offset by softer Everyday Needs sales.
Average prices (ex Tobacco) in Q2 declined 0.5% compared to the prior year, marking eight consecutive quarters of year-on-year price declines. Deflation in Grocery was driven by lower shelf prices and an increase in promotional activity to provide more value to customers, somewhat offset by inflation in Fresh driven by Meat, with higher prices in lamb and beef.
Sales per square metre increased by 2.1% in H1 with average space growth of 1.3%. During the half 10 net new stores were opened and 30 renewals were completed with eight new supermarkets opened in Q2.
Online
In WooliesX, eComX sales in H1 increased 15.3% to $4,331 million and eCommerce penetration reached15.6% in Q2, up 170 bps on the prior year. After a more subdued start to the half, eCommerce and Rewards competed more effectively with offers resonating with customers and driving improved traffic in Q2 with sales growth of 17.9% (15.1% ex IA).
On Demand propositions continued to increase in popularity with MILKRUN the fastest growing eCommerce proposition in the half and available from 642 stores by the end of December. In Q2, online delivery orders fulfilled within two hours increased by 3.4 pts on the prior year to 43%.
Pick up mix in Q2 increased 209 bps on the prior year to 42.8% with 23 Direct to Boot locations added in H1 bringing the total to 778 locations. Direct to Boot Now (sub-60-minute service) was added to a further 60stores in H1 with the service available in 573 stores at the end of the half.
B2B
Australian B2B total sales in H1 increased by 4.9% to $3,128 million driven by growth in B2B Food. B2B Food sales increased by 9.2% to $1,943 million driven by strong PFD and export meat sales growth.
Sales across all of PFD’s channels grew on the prior year with QSR remaining the strongest. Underlying sales growth and outlet expansion were the key drivers of growth and a number of key national QSR customer contracts were also retained in the half following a competitive tender process. Sales of export meat increased by 36% with strong volume growth reflecting demand for Australian meat.
Looking ahead
Looking to H2, Ms Bardwell said trading in Q3 to date has been strong in Australian Food; however, customers continue to be value-focused, shopping multiple retailers in a highly competitive environment. “Our focus is to continue to provide value to customers, rebuild trust and maintain sales momentum while making further progress on our strategic priorities to deliver for our customers, team and shareholders,” she said.
