Shares in Woolworths (Woolies) surged 8 percent yesterday following the group announcing that it had hiked its dividend by almost 126 percent as its results beat market expectations and its fashion businesses finally saw green shoots of recovery.
The shares traded at a high of R57.85 in intraday trade yesterday following the news.
Woolies chief executive Roy Bagattini said: “I am very pleased with the group’s performance. We have delivered the healthiest balance sheet in almost a decade, double-digit profit growth supported by strong momentum in Australia, signs of the turnaround of FBH (Fashion Beauty and Home), and the return of excess cash to our shareholders.
“We are on track to rebuild our financial credentials, drive long-term value creation, and restore our business to its rightful place in the hearts and minds of all our stakeholders,” he said.
For the 52 weeks ended June 26, 2022, the group declared a final dividend of 149 cents, a 125.8 percent increase. This brings the total dividend for the year to 229.5c, a 247.7 percent increase.
Headline earnings per share were up 6.5 percent to 398.9c per share. Turnover and concession sales for the reported period increased by 1.4 percent. Online sales grew by 16.4 percent.
Woolies said trade during the second half of the year showed an improved run rate over the first half of the year across all its businesses. Group turnover and concession sales grew as lockdown restrictions eased.
Turnover in Woolworths’ Fashion Beauty and Home business increased by 5.4 percent, with full-priced sales growing by 8.8 percent. The Woolworths Food business grew turnover and concession sales by 4.6 percent, while the Woolworths Financial Services book reflected a year-on-year increase of 6.8 percent.
In its Australian and New Zealand businesses, strong consumer demand and a focus on trade resulted in a healthy rebound in sales.
David Jones turnover and concession sales declined by 2.6 percent for the full year and by 2.5 percent in comparable stores, but grew by 4.3 percent in the second half of the year, after the easing of lockdown restrictions.
Country Road Group sales grew by 9 percent and by 11.3 percent in comparable stores for the second half of the year, resulting in positive full-year sales growth of 3.1 percent and 4 percent, respectively.
Looking forward, the group said the global macro environment remained volatile, with rising inflation and interest rates posing a headwind to the outlook for economic growth.
“Whilst this impact on Australian consumer spend should be somewhat mitigated by strong household balance sheets and high employment, South African consumption faces high unemployment and severe energy shortages,” it said.
Sanlam Private Wealth senior investment analyst Renier de Bruyn said the Woolies results exceeded market expectations, but in contrast to previous years it was the fashion businesses that finally picked up the slack while growth in the South African food business slowed.
“There appear to be green shoots at the long-term under-performing SA fashion business, where trading densities and gross margins improved, suggesting some success on the refined fashion offering. The Australian fashion businesses showed a healthy recovery in the second half of the year, after suffering from the impact of lockdowns in the first half.
“Country Road is especially showing good momentum, while good cash flow management at David Jones is assisting the group to recoup some of its investment through dividends and puts it into a better position for potential sale,” De Bruyn said.
The group’s cash generation was quite impressive, and it’s now in a positive net cash position versus more than R10 billion in net debt two years ago, said De Bruyn.
“Apart from returning most of the free cash flow to shareholders through dividends and share buybacks, it is clear that management wants to use their healthier balance sheet to step up investment in their supply chain and data initiatives to further modernise the business and remain on the front foot in terms of operational momentum,” De Bruyn said.
BUSINESS REPORT