Woolworths share price gaps lower after FY24 results release

Key Takeaways

1. Total Group turnover, including an additional week and contributions from David Jones in the prior year, declined by 10.7%. Overall profit before tax fell by 34.6% to R3.5 billion, impacted by challenging macroeconomic conditions.
2. The South African operations, including Woolworths Food and Fashion, Beauty, and Home (FBH) divisions, demonstrated mixed results.
3. In Australia and New Zealand, the Country Road Group (CRG) faced deteriorating market conditions, leading to a 6.8% decline in sales for the 53-week period.
4. Woolworths continued its strategic investments, focusing on innovation and market expansion, including the acquisition of Absolute Pets. Efforts to boost online sales resulted in a significant 52.8% growth. The Group declared a final dividend of 445 cents per share, reflecting its commitment to shareholder returns despite external challenges.
5. The outlook remains cautiously optimistic, particularly in South Africa, where the national election and suspension of loadshedding have created a more favorable business environment.

Financial performance overview

Woolworths Holdings Ltd. reported its audited financial results for the 53 weeks ending June 30, 2024, showcasing mixed but resilient performance against challenging macroeconomic conditions. The Group's turnover from continuing operations rose by 4.0% to R75.2 billion, although total Group turnover, including the additional week and the previous year's contribution from David Jones, declined by 10.7%. Despite a 6.2% increase in turnover and concession sales from continuing operations, the overall profit before tax fell by 34.6% to R3.5 billion, highlighting the impact of a weaker trading environment.

Sector performance and strategy

The South African operations, which include Woolworths Food and Fashion, Beauty, and Home (FBH) divisions, showed robust growth. Woolworths Food exhibited strong resilience with an 11.2% increase in turnover and concession sales, driven by market-leading like-for-like sales growth and price management. Conversely, the FBH segment struggled, with only a 1.4% increase in sales amidst a weak macro environment and disruptive international competition. In Australia and New Zealand, the Country Road Group (CRG) faced deteriorating market conditions, resulting in a 6.8% decline in sales for the 53-week period.

Investment and outlook

Woolworths maintained its strategic investments, focusing on innovation and market expansions, including the acquisition of Absolute Pets and efforts to improve online sales, which grew by 52.8%. The Group declared a final dividend of 445 cents per share. Despite the external challenges, the outlook remains cautiously optimistic, particularly in South Africa following the national election and suspension of loadshedding. Woolworths aims to capitalize on potential consumer recovery while maintaining robust cash generation and a strong balance sheet to invest in future growth avenues and optimize existing businesses.

Woolworths – technical analysis

The share price of Woolworths continues to trade in a broad rangebound environment. The price has started to retrace from overbought territory and resistance at around 6460, targeting support between levels 5740 and 5540.

Range traders might prefer to wait out weakness looking for new long positions on a bullish price reversal closer to either the 5740 or 5540 level. In this scenario a move back towards 6460 might be expected, while a close below the reversal low could be used as a stop loss indication.