Australia Markets closed

Woolies profit up but bag ban slows sales

Lilly Vitorovich
Retail giant Woolworths has posted an annual net profit of $1.72 billion

Woolworths has delivered a 12.5 per cent jump in annual net profit to $1.7 billion but says supermarket sales in the new financial year have been hampered by its ban on single-use plastic bags.

Chief executive Brad Banducci said sales slowed in the first seven weeks of 2018/19 as customers adjusted to the removal of single-use plastic bags from Woolies checkouts in June.

Rival Coles ended single-use bags in July but backflipped on a plan to charge for bags after public pressure and continued to give them away for free.

Woolworths' new financial year sales have also been affected by falling prices for meat, fruit and vegetables.

The group's Australian Food unit, including nearly 1,000 Woolworths supermarkets, reported a 1.3 per cent rise in comparable sales, which excludes new store openings, in the first seven weeks of 2018/19.

That compares with a 3.1 per cent rise in comparable sales in the fourth quarter to June 24 and 4.3 per cent growth for 2017/18.

Mr Banducci said full-year figure was the "strongest sales growth in a number of years".

Woolworths' ban of single-use bags from June 20 led to a "slowdown" in customer visits and slightly different items in customer baskets, he said on a media call.

"Our experience when we did our pilot stores is that it does take somewhere around eight to 10 weeks for customers just to adapt to the new rules and we're starting to see that happen," Mr Banducci said.

The company had added more staff at checkouts since the ban and customers were starting to remember to bring their reusable bags, he said.

Woolworths' full-year net profit was $1.72 billion, while sales across the group, which includes supermarkets, beverages, department stores, hotels and the New Zealand, were up 3.4 per cent to $56.73 billion.

Its drinks operations, which includes Dan Murphy's, BWS, Cellarmasters and Langtons, booked a 2.8 per cent rise in pre-tax earnings to $516 million.

Woolworths says there has been early progress in the turnaround of its budget department store chain BIG W, with losses dropping 27 per cent to $110 million in 2018/19.

BIG W's comparable sales rose 0.9 per cent, the first increase since 2008/09, driven by price cuts and an overhaul of the majority of its 186 stores and product ranges.

"However, financial performance will continue to be driven by the key Christmas trading period," Mr Banducci said.

Woolworths' pubs and poker machines business lifted earnings 11.1 per cent to $259 million and sales by 3.7 per cent to $1.6 billion.

Woolworths will pay a final dividend of 50 cents a share, unchanged from a year earlier, plus a special dividend of 10 cents a share.

At 1125 AEST, Woolworths shares were down 20 cents, or 0.6 per cent, to $29.40 in a flat Australian share market.

SUPERMARKET SALES BOOST WOOLWORTHS FY18:

*Net profit up 12.5pct to $1.72b

*Sales up 3.4pct to $56.73b

*Fully franked final dividend of 50 cents/share, unchanged, plus special dividend of 10 cents a share, fully franked