Woolworths has reported a 3.6 per cent drop in underlying profit from continuing operations, driven by heavy losses in its troubled Big W chain and discounting in its supermarket division.
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Total sales at the supermarket giant and its retail offshoots grew by $3.7 billion to $55.4 billion in the year to June 30, it revealed on Wednesday, falling slightly short of the analyst consensus forecast of $57.7 billion.
Woolworths' Australian food division saw sales grow by 4.5 per cent but earnings before interest and tax fell 2.4 per cent. On the bright side, earnings rebounded and rose 13.2 per cent in the second half of the year.
Same-store supermarket sales grew 3.6 per cent during the year, pulling ahead of rival Coles which last week revealed that its comparable sales growth had slipped to 1 per cent and its revenue fell 0.1 per cent.
Woolworths chief executive Brad Banducci said customer satisfaction rates had improved as the retailer invested in service and lower prices, with average grocery prices falling 2.1 per cent during the year.
He said the supermarket chain had been price competitive with Coles for almost two years but relied too heavily on discounting and specials. It had now moved towards lower everyday prices on core items, which would improve customer confidence and their perception of value.
"We want our shoppers to know that every time they shop Woolworths, on average they will get a very good deal," Mr Banducci said.
Losses at Big W blew out from $14.9 million in 2016 to $150 million, with total sales falling 5.8 per cent. Woolworths said that loss was disappointing and warned it did "not expect a reduction in losses" as it invested in improving Big W's customer service and price competitiveness.
'Dated and tired'
"Clearly we'll be doing work around our range, and our offer, making sure we give customers more choice and we'll be looking to refresh our stores to make sure they don't look so dated and tired," Big W managing director David Walker said.
"But frankly, being focused on price and making sure customers start to trust our low price offer again is our priority."
Alcohol retailers Dan Murphy's and BWS saw 4.3 per cent sales growth and 3.9 per cent earnings growth. Online sales were a highlight of the division, Woolworths said, with Dan Murphy's online business seeing 25 per cent growth.
Mr Banducci said Woolworths had made good progress turning the business around in 2017, but there was "a long way to go", with 2018 shaping up as an "unbelievably important" year.
"It's one thing to make some progress when you've had some some negative numbers that you've had the ability to jump over," but another thing altogether to maintain growth in the following year compared to those positive numbers, he said.
The group's earnings before one-off costs and writedowns fell to $1.42 billion, down from $1.46 billion in 2016 and short of analyst forecasts of $1.47 billion.
Woolworths' net profit jumped to $1.53 billion after a loss of $1.23 billion in 2016, when it booked $3.2 billion in impairments and costs related to Big W and exiting its Masters home improvement business.
Woolworths announced a final dividend of 50?? per share, bringing the full year dividend to 84??, up 9.1 per cent on last year.
Its shares were up 0.7 per cent at $27.25 by 11.15am, the highest they have traded since early May.
