Sunday, June 16, 2024

Woolworths posts $1.2 billion loss

Failed home improvement venture Masters, struggling discount chain Big W, and a fall in EBIT earnings in food and petrol sales have seen Woolworths Ltd announce a $1.23 billion loss for FY16.

The company’s net profit over the period slipped from $2.14 billion in FY15, while dividends fell to 33¢, compared to 72¢ 12 months ago. Sales revenue across the group fell 1.23 per cent to $58.086 billion, while food and liquor EBIT fell from $2.97 billion to $1.76 billion, following a decline in items per basket and petrol sales. Endeavour Drinks, the company’s liquor division, bucked the trend to post growth of 4.7 per cent, outpacing market growth.

In a statement, Woolworths Ltd Chief Executive Brad Banducci said that the preceding 12 months were an unparalleled time of change for the company and that progress on transforming the business was being made.

“The decisions we have taken and investments we have made have had a material impact on our FY16 results, but have been necessary to begin the rebuilding of Woolworths,” he said. “We are seeing early signs of progress as we work to restore our competitiveness and improve our culture in Australian food. 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.”

Mr Banducci said that Woolworths would focus on improving customer service, generating suatainable sales momentum in its food operations, evolve its drinks business to improve value and convenience for customers, and become a ‘lean retailer’. This final point will see the loss of 500 support-office and supply chain roles.

The results came on the back of Woolworths’ announcement on the closure and sales of the Masters Home Improvement business. Eighty-two Masters sites will cease operating before December 11, and be sold to Home Consortium (Aurrum Group, Spotlight Group and Chemist Warehouse) to be repurposed as multi-tenant large format centres.

Metcash will acquire the Home Timber & Hardware Group for $165 million, with the business continuing to trade. Inventory specialists GA Australia will manage the sales of Masters Home Improvement inventory, estimated to deliver gross proceeds of $500 million.

The collective sales contracts will bring estimated gross proceeds of $1.5 billion, with net proceeds estimated to be around $500 million after wind-down costs and prior to any shareholder payments.

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