- Wooolworths released its financial results for the 2020 financial year.
- It reported a 21.1% drop in profit after tax across its continuing operations.
- The company’s profit losses were partially attributed to the government’s closure of pubs and hotels during the earlier months of the coronavirus pandemic.
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Woolworths Group released its results for the 2020 financial year, highlighting the impact the coronavirus pandemic has had on its performance.
The company reported an EBIT (earnings before interest and tax) across its continuing operations of $2.63 billion, an 11.8% rise from the year before ($2.35 billion).
However, it recorded a 21.8% drop in net profit after tax across its continuing operations to $1.16 billion, compared to the 2019 financial year ($1.49 billion).
Woolworths Group CEO Brad Banducci said the closure of the company’s hotels impacted the earnings during the second half of the financial year as compared to the previous year. But its earnings were partially helped by sales across its retail businesses.
“COVID-19 also impacted the customer shopping experience, particularly in March and early April, driven by material levels of pantry-loading,” Banducci said in a statement.
“We initially experienced a decline in customer satisfaction scores due to lower stock availability; however, scores quickly recovered in April as customers recognised the efforts of our team to provide an essential service, keep them safe and deliver additional convenience.”
Woolworths said that, despite having strong sales growth during the last four months of the financial year, its earnings were impacted by higher costs related to being a COVID Safe business. These included extra costs related to cleaning, security and personal protective equipment.
Across its Woolworths supermarkets, sales “increased strongly” during the second half of the financial year due to panic buying, as Aussies “consumed more at home”.
Woolworths group, however, was particularly “proud” of Big W’s performance, which reported an EBIT of $39 million. This came as customers flocked to buy apparel, home appliances, office equipment, cleaning and heating supplies. On top of that, online sales at Big W also shot up 181% in the fourth quarter, accounting for 8.4% of total sales.
However, four Big W stores were closed during the 2020 financial year, with another three set to shut at the end of January 2021. The Big W Monarto distribution centre is also set to close in the current financial year.
Woolworths Group’s losses were attributed to the government’s order to close hotel venues in March, which impacted the company’s hotel operations. Its hotel sales dropped 19.5% compared to the year before to $1.3 billion. And when looking at the EBIT for hotels, that fell 51%.
The group’s earnings were also affected by its Endeavour Group transformation costs – with its plans to separate its combined drinks and hospitality company Endeavour Group in 2021 – and its remediation costs for employees.
Following a company review, Woolworths discovered it had underpaid its workers and in its latest results, revealed an estimated $500 million of payment shortfalls.
Looking ahead, Banducci acknowledged that while the group has experienced a strong start to the 2021 financial year, the outlook for the rest of the year is “very difficult to predict”.
“Unfortunately, we expect to be living and working with COVID for the foreseeable future,” he said. “We support government measures to contain the virus and support the economy but expect conditions to remain volatile and challenging.”
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