Woolworths shareholders find cause for chuckles after 247% dividends hike

31 Aug 2022

While turnover was more or less flat at R87bn, the group revealed its strongest balance sheet since 2014, with annual results pointing to a post-Covid stabilisation of the up-market retailer’s South African and Australian business.

Woolworths shoppers have already noticed a proliferation of Chuckles products in stores, from the original product to shopping bags, chocolate bars and even a Chuckles Smash Celebration Cake. And this week, shareholders are chuckling while they eat that celebration cake with an almost 250% increase in dividends.

The board declared a final dividend of 149 cents, bringing the total dividend for the year to 229.5c, a 247.7% increase on the prior year’s total dividend of 66c.

While turnover was more or less flat at R87-billion, the group revealed its strongest balance sheet since 2014, with annual results pointing to a post-Covid stabilisation of the upmarket retailer’s South African and Australian business.

Shareholders’ relief at the wonderful flatness of Woolies trading was palpable, with the share price jumping by 7.6% on the morning of the results announcement, moving from an opening price of R53.45 to a high of R57.55 before settling around the R56 mark.

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Although not a definitive turnaround, the trading results in difficult conditions suggest Woolworths might have reached a demarcation point in its long battle to convince shareholders that its decision to enter the Australian market in 2014 was correct. The market has been speculating for some months now over the possibility of a sell-off of the David Jones division, but the division shot the lights out with its Ebit (earnings before income and taxes) up by 86%.

David Jones’ turnover declined by 2.6% for the full year, due to government-imposed lockdowns for the majority of the first half, but grew by 4.3% in the second half, after the easing of lockdown restrictions.

Chief financial officer Reeza Isaacs said the David Jones division had been “remarkably resilient in a challenging year”, ending the year with $250-million in cash. “It is no longer a financial drag on the group, a notable shift from where we were not that long ago,” he said.

In South Africa, management plans to push R8-billion into expansion plans over the next three years, with a focus on digital and data. The food business continues to generate the highest return on capital employed in the market.

“While our competitors have been opening new stores, we’ve been consolidating and that’s seen us lose some market share in the post-Covid world. We have a comprehensive, integrated and obsessive approach to food quality and a commitment to sustainability,” he said.

Looking ahead, Woolworths Food will focus on three priorities: driving on-shelf availability, amplifying a differentiated value proposition and increasing marketplace presence.

Woolworths’ CEO, Roy Bagattini, said that since 2020, store footprint space had grown by only 3%, which was a deliberate decision at the time.

“We’re now setting up our space growth in a targeted way with both new stores and the expansion of existing footprints, enabling our growth in new categories such as pet, wellness and liquor,” he said.

Push for greater online capacity

When it comes to online capacity, management plans to double the number of Dash performance stores within the next few months and will be integrating the Dash offering into the main Woolies app within the next few weeks. The fashion, beauty and home segment grew turnover by 5.4% with a 13.2% increase in online sales.

Country Road group sales grew by 3.1%, notwithstanding a further 8.1% reduction in trading space. This result was driven primarily by a strong performance from the Country Road, Trenery and Politix brands, following the successful launch of new ranges and the ongoing focus on brand and product positioning. Online sales increased by 4.6% and contributed 31.6% to total sales for the year. DM/BM

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Push for greater online capacity