Covid costs weigh on Woolworths' (ASX:WOW) earnings

Company News

by Lauren Evans

Woolworths (ASX:WOW) reported on its first half of FY22, saying Australian Food earnings are expected to be weaker than a year ago with Covid-19 costs still weighing.

For the first half of the year, the company's Australian Food earnings before interest and taxes is expected to be between $1.19 billion and $1.22 billion, down from $1.312 billion over the same period a year ago.

The supermarket giant said while its sales and customers remained strong relative to the overall market, both indirect and direct costs associated with Covid-19 impacted the business. This includes the significant disruptions seen across the end-to-end supply chain, and the material inefficiency this causes in its stores, distribution centres and transportation.

“The first half of FY22 has been one of the most challenging halves we have experienced in recent memory due to the far-reaching impacts of the Covid Delta strain and its impact on our end-to-end stock flow and operating rhythm,” said CEO Brad Banducci.

“Sales growth in Australian Food is positive on a one-year basis and strong on a two-year basis but moderated in Q2 following the easing of restrictions in NSW and Victoria.”

“However, the ongoing material costs of operating in a Covid environment has impacted our expected earnings in H1. Covid has had a significant impact on costs, even more so than last year due to the combination of both direct Covid-related costs, together with the indirect impacts from disruption caused by Covid."

Shares in Woolworths (ASX:WOW) are trading 9.7 per cent lower at $36.62.

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