Woolworths Swings To Annual Profit, Sees Challenges Ahead

By Mike Cherney Features Dow Jones Newswires

Australian grocer Woolworths Ltd. (WOW.AU) swung to an annual net profit as impairment charges in the prior year due to the exit from its home-improvement business weren't repeated.

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The company said its net profit totaled A$1.53 billion Australian dollars (US$1.21 billion) for the 12 months ended June 25, compared to a loss of A$1.23 billion a year ago. Net profit from continuing operations, however, declined by 3.6% to A$1.42 billion.

Woolworths declared a final dividend of 50 Australian cents per share, bringing total payout for the fiscal year to 84 cents, up from 77 cents last year.

Woolworths said total sales grew 4.5% in its key Australian food division, with comparable sales growth of 3.6%. But the company warned that it doesn't expect sales growth to continue at the same rate as achieved in the final quarter of the recently concluded fiscal year, which it said was 7.2%, adjusted for Easter. In the first eight weeks of the current year, it said comparable sales growth has been broadly in line with the second half of the recently concluded year.

The company also said it doesn't expect an improvement in losses at the Big W discount chain, and that it's too soon to tell whether turnaround efforts will translate into sales momentum and improved profitability.

Woolworths is locked in a battle with chief competitor Coles, owned by Wesfarmers Ltd. (WES.AU), as well as new entrants like discount chain Aldi. The possible arrival of Amazon.com Inc. (AMZN) into the grocery space as early as next year also looms. Analysts, however, have said Woolworths has seized momentum from Coles recently.

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Still, Woolworths said it expected the second half of the fiscal year to continue reflect higher costs in areas such as team incentives and training, as well as from promotions in the tough competitive environment.

Woolworths is also looking to exit its gas-station business by selling the unit to BP PLC (BP) for A$1.8 billion, but still needs approval from Australian regulators who have raised concerns about the deal. On Wednesday, the company said it continues to engage with regulators over the deal.

-Write to Mike Cherney at mike.cherney@wsj.com

(END) Dow Jones Newswires

August 22, 2017 19:11 ET (23:11 GMT)