The Woolworths Group Ltd (ASX: WOW) share price is under the spotlight as the company announced its HY23 report.
Woolworths doesn’t just operate large Australian supermarket stores. It also has small Metro stores in cities, an Australian business to business (B2B) food division, a New Zealand food segment, BIG W and it recently announced the acquisition of a large stake of PETstock owner Petspiration.
Woolworths HY23 result
Here are some of the highlights, excluding the significant items, from the report for the first half of FY23:
- Sales increased 4% to $33.2 billion
- EBITDA (EBITDA explained) rose by 12.7% to $2.9 billion
- EBIT increased 18.4% to $1.6 billion
- Net profit after tax (NPAT) grew by 14% to $907 million
- Profit / earnings per share (EPS) jumped 11.7% to 71.9 cents
- Dividend up 17.9% to $0.46 per share
During the period, Woolworths also recognised $76 million of significant costs relating to its payroll review, increased redundancy costs, the reversal of historical ‘onerous lease provisions’ related to the BIG W network review, as well as costs associated with the exit of Summergate.
After significant items, the net profit was $845 million.
Woolworths has a remaining provision of $276 million for the payroll review, which represents the “best estimate” of the remaining obligation to be settled, but is subject to verification, finalisation of payment and conclusion of engagement with regulators.
Looking at the individual businesses – Australian food sales increased 2.5%, Australian B2B sales increased 23%, New Zealand food sales rose 1.3% in NZD terms and BIG W sales increased by 15.3%. Growth across the board is good news for the Woolworths share price.
However, Woolworths also put down some of the profit growth down to large COVID costs in the first half of FY22 not being repeated in the FY23 first half.
Food inflation
Woolworths said that food inflation continued to rise during the half, reflecting “industry-wide cost pressures” with the second quarter average price growth of 7.7%, higher than the first quarter growth of 7.3%.
‘Long life’ prices continued to increase, though some fruit and vegetable prices moderated as supply improved.
Outlook for the Woolworths share price
Woolworths was expected to make $882.5 million of net profit, according to Bloomberg numbers, with a dividend per share of $0.44.
The supermarket business said in its trading update, that food sales in the first seven weeks of the second half had grown by 6.5%. Cost growth in the second half will also benefit from COVID costs not happening again, though this effect will be less in the second half than the first.
In New Zealand food, sales increased 6.3% for the first seven weeks, while BIG W sales grew by 9.7%.
As long as Woolworths’ sales and profit keep growing, I think it can improve its underlying value. But, at the current prices I think I’d rather invest in Coles Group Ltd (ASX: COL) shares or other ASX dividend shares.
