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Woolworths profit dips despite strong sales

Supermarket giant Woolworths has reported a 1.2 per cent drop in underlying profit to $1.6 billion due to skyrocketing costs and the temporary closure of its hotels business.  

The retailer recorded sales of $63.7 billion in FY20, up 8.1 per cent on the previous year, due to strong performances at supermarkets, liquor stores and BIG W department stores.

However, one-off costs for the Group ballooned to $591 million. These included $185 million related to staff underpayments, $176 million in supply chain transformation costs, and $230 million for the restructuring of Endeavour Group.

In Q4, Woolworths Supermarkets saw like-for-like sales growth of 8.9 per cent. Earnings in the second half increased by 4.6 per cent with Covid-related sales growth somewhat offset by roughly $290 million in Covid-19 costs such as cleaning and security. 

Online was a big winner for Woolworths this year as many consumers opt to avoid crowded supermarkets. Group online sales rose 41.8 per cent to $3.5 billion, with record Q4 online penetration of 6.3 per cent. 

Department store BIG W made a major turnaround in FY20, returning to profit and reporting earnings before interest and taxes of $39 million.

Chief executive Brad Banducci said Woolworths is “especially proud” of the achievements of the BIG W team.

“BIG W had strong sales momentum prior to Covid but sales growth increased materially from March. Growth was initially in lower-margin household items; however, in Q4, all major categories delivered strong growth including Apparel. Online sales increased by 181% in Q4 to 8.4% of total sales,” he said.

Looking towards the year ahead, Banducci is mindful of continuing to providing a safe environment for staff and members of the public. 

“The main priority for F21 is making COVIDSafe a part of everything we do,” he said. 

“I again want to recognise the way our team has continued to respond to the ongoing challenges, and I continue to be inspired by our team’s collective commitment to do the right thing.”

Minimum wage increase 

On Wednesday, the supermarket giant agreed to a minimum wage increase ahead of Fair Work’s scheduled retail award rise in February next year. 

Legal proceedings between the Shop, Distributive and Allied Employees Association (SDA) and Woolworths have been withdrawn after the retailer agreed to the deal in which it will backdate the increase to July 1, 2020.

“Woolworths has done the right thing by its team in bringing forward these pay increases ahead of the FWC schedule and should be congratulated for putting their team first,” SDA national secretary Gerard Dwyer said on Wednesday. 

“Our members are providing an essential service to the community through the crisis of our generation and deserve every bit of this pay increase.”

Staff at Woolworths Supermarkets, BIG W, BWS and Dan Murphy’s will receive the new minimum wage of $19.84 per hour.

Woolworths general manager of workplace relations Hayley Baxendale said the retailer is pleased to have reached “a mutually agreeable outcome”.

“We care deeply for our team and feel that delivering these pay increases early – without lengthy legal proceedings – is just the right way to resolve the issue and move forward,” she said.

Dwyer is urging other large retailers to follow Woolworths’ lead in bringing forward the increase.

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