Woolworths boosts full year dividend by 13% on solid revenue and earnings growth

Company News

by Glenn Dyer

Woolworths (ASX:WOW) shareholders are set to benefit from a 13% increase in the full-year dividend as the supermarket giant disclosed robust growth in revenue and earnings for the year ending June 25.

The retailer reported a 5.7% rise in revenue to $64.3 billion for the 2022-23 fiscal year. This increase trailed the 6% rise in the Consumer Price Index (CPI) for the same period and the 7.5% increase in the cost of food and non-alcoholic beverages.

However, the company's earnings before interest and tax (EBIT), a key measure of retail profitability, surged impressively by 15.6% to a record $3.116 billion. This growth rate was more than twice the rate of inflation (CPI and food).

The net profit after tax saw a modest 4.6% uptick, landing at $1.618 billion, though the crucial measure for retailers is the EBIT performance.

In comparison, rival Coles announced a 4.5% increase in its EBIT to $1.9 billion, showcasing that the scale of the figure is less important than the size of the rise or fall. Coles' supermarkets revenue also climbed by over 6% to $36.75 billion (excluding alcohol).

Woolworths attempted to mitigate the impact of the sharp EBIT increase by pointing out that deducting the $323 million in Covid-related costs from 2022 (which were unnecessary in 2023) resulted in a rise of 3.4%. However, these avoided costs directly boosted Woolworths' EBIT in its 2023 profit report. Those Covid-related costs turned into savings in the latest year, which could have offset other increases, such as dairy or bread costs.

The company raised its final dividend by 9% (outpacing inflation) to 58 cents per share, leading to a full-year payout of $1.04 per share, representing a 13% increase from the 92 cents per share paid for the 2022 financial year.

According to the Australian Bureau of Statistics Consumer Price Index data, the year to June witnessed a 6% CPI rise, but a 7.5% surge in the cost of "food and non-alcoholic beverages." This increase of 7.5% over the year was lower than the peak of 9.2% in the December quarter.

Woolworths' CEO, Brad Banducci, stated in an ASX filing, "The 2023 financial year marked a return to relative stability after several years of material COVID-related disruption."

He acknowledged, "While overall customer demand has been remarkably stable, we are increasingly seeing our customers become more careful in their spending patterns, particularly our Saver Families, and in more discretionary categories."

Looking forward, Woolworths anticipates food inflation in Australia and New Zealand to continue moderating but to remain elevated in some packaged categories. The company expects the consumer environment to remain challenging, with customers continuing to cut back on non-essential items. Despite these challenges, Woolworths remains committed to investing in customer value and convenience, supporting its teams, and enhancing its platforms to ensure a better and more sustainable future for stakeholders.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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