Results: Woolworths shares down even as shareholder returns top $3bn

2019 full-year results at a glance

When Woolworths Group Limited (ASX: WOW) released its FY19 results to the market today, it reported that total group profits (NPAT) climbed, sales had risen 3.2% and the company revealed that it had returned approximately A$3.1bn to shareholders.

These figures didn’t prove convincing to investors in early trade however; with the Woolworths share price falling 1.52% during the morning session – to A$35.61 per share.

By the afternoon session Woolworths shares traded slightly higher, though they were still down 0.47%.

Frontline financials in focus

All up and from continuing operations, Woolworths Group Limited saw sales hit A$59,984m, earnings (EBIT) climb to 2,724m and profits (NPAT) rise to A$1,752m in FY19.

Speaking of these results, the Group’s CEO, Brad Banducci maintained that Woolworths:

'Made good progress on our transformation across all of our businesses in FY19 with improving sales and EBIT momentum in H2.’

Commenting on this notion of ‘transformation’, Mr. Banducci continued by pointing out that:

'A number of landmark transactions for the Group were completed or have commenced in the last 12 months. The sale of Petrol was finalised in April with the proceeds of $1.7 billion returned to shareholders through a share buy-back.’

These transformative initiatives have translated into strong shareholder returns, with Woolworths (ASX: WOW) seeing its share price rise around 22% since January – outpacing the ASX 200 index.

In addition to this, today the company declared a full-franked, final dividend of 57 cents per share. All up, this takes the Group’s FY19 dividends to 102 cents per share and represents a 9.7% increase on the previous corresponding period.

Including the off-market buy back just mentioned, Woolworth calculates that it has generated approximately A$3.1bn in shareholder returns during FY19.

Below we’ll take a brief look at two of Woolworths key business segments, food and retail (Big W).

Food & WooliesX

Woolworths food operations remains the bread-and-butter of the Group’s top and bottom-line financial performance.

FY19 food sales came in at A$39,568m, while earnings (EBIT) contributions hit A$1,857 – a sizable 68% of the Group’s EBIT.

Though the company reported some issues during the first-half of FY19, management noted that sales momentum was boosted in the second-half thanks to a number of key initiatives, including: the Disney Words and Earn & Learn campaigns.

Though overall food operations remained stable, WooliesX exhibited impressive growth during FY19.

Across this segment, WooliesX – the company’s e-commerce business arm – saw online sales rise an impressive 31%, driven by the expansion of it its Pick up, Drive and recently launched On-Demand services.

Retail (Big W)

Though Woolworths Group Limited food business segment remains healthy, the Group’s Big W retail operations looks less so.

Indeed, as a loss (LBIT) before significant items of A$85m would suggest, Big W continues to struggle in an ever-changing retail environment.

Positively at least, this loss was actually slightly lower than the upper guidance range that management had previous provided – which projected a loss of between A$80m to A$100m.

Not only that, but Big W saw modest sales momentum in FY19, with revenue growing 4.2% on a normalised basis.

Speaking of Big W’s financial performance in April, management previously pointed out that:

‘We are not satisfied with the rate of translation of sales growth into profit with the announced store and DC closures underway to accelerate the path to profitability.’

Given the A$85m loss posted in FY19, such a path looks to be marred by uncertainty.

Woolworths share price: final thoughts

Speaking of the 2020 outlook, Woolworths Group CEO, Brad Banducci optimistically commented that:

'Sales momentum across the Group improved in the second half of F19 and we have carried this momentum into F20.

Even so, Mr Banduccii warned that the 'consumer environment remains uncertain', as cost of living pressures weigh on the minds’ of everyday Australians.

Such concerns however are certainly not specific to Woolworths Group Limited (ASX: WOW), but are currently impacting many blue-chip Australian companies.