Woolworths Reports More Than 20% Decline in EPS for FY 2024

  • Woolworths Holdings reports more than 20% lower EPS, HEPS, and adHEPS due to David Jones disposal and economic pressures.
  • Challenging market conditions impact consumer spending, leading to declining footfall and discretionary spend in apparel businesses.
  • Resilience shown in Food business with strong trade, market share gains, and investments in innovation and value proposition.

Woolworths Holdings Limited (WHL) has announced a significant shift in its financial landscape for the fiscal year ending 30 June 2024. This article delves into the key aspects of WHL’s trading statement, highlighting the challenges and strategic moves influencing the Group’s performance.

Disposal of David Jones and Financial Implications

WHL disposed of its David Jones operations in the third quarter of the 2023 financial year. This strategic move was aimed at refocusing the Group’s portfolio and streamlining operations. However, the disposal has led to notable differences in year-on-year comparisons. The earnings per share (EPS), headline EPS (HEPS), and adjusted diluted HEPS (adHEPS) for the current period are expected to be more than 20% lower than the prior year. This is partly due to the inclusion of David Jones in the 2023 results, which also accounted for the profit on disposal.

Financial MetricPrior Year (52 Weeks)Current Period (53 Weeks)
EPSHigherMore than 20% lower
HEPSHigherMore than 20% lower
adHEPSHigherMore than 20% lower

Challenging Market Conditions

Impact on Consumer Disposable Income

High interest rates and living costs continue to exert pressure on consumer disposable income. These economic factors have created a challenging environment for WHL’s apparel businesses, both in South Africa and Australia.

Decline in Footfall and Discretionary Spend

Footfall and discretionary spending have deteriorated further than expected. This trend has significantly impacted the Group’s apparel businesses, which are struggling with negative operational leverage due to weaker sales.

Operational Leverage and Cost Control

While the Group has maintained stringent cost control measures, the weaker top-line environment has resulted in continued negative operational leverage. In Australia, the Country Road Group is particularly affected by inflated import costs due to a weaker Australian Dollar (AU$), coupled with higher fixed costs. These challenges have exacerbated the financial strain on WHL’s apparel segment.

Resilience of the Food Business

Strong Trade and Market Share Gains

Despite the difficulties faced by the apparel segment, WHL’s Food business has demonstrated resilience. Strong trade and market share gains have underpinned the performance of this segment.

Investment in Innovation and Value Proposition

The ongoing investment in innovation and a compelling value proposition have been critical to the success of WHL’s Food business. These investments have enabled the Food business to weather the challenging economic climate better than the apparel segment.

Future Outlook and Guidance

WHL has committed to issuing a further trading statement to provide specific guidance on the Total Group and its continuing operations. This statement will be released once the Group is reasonably certain regarding the EPS, HEPS, and adHEPS ranges for the 53 weeks ended 30 June 2024. The Group’s results for the year are expected to be released on or about 4 September 2024.

Conclusion

Woolworths Holdings Limited is navigating a complex financial landscape characterized by significant changes and economic pressures. The disposal of David Jones has created a challenging comparative base, while high interest rates and living costs have impacted consumer spending. Despite these challenges, WHL’s commitment to cost control and strategic investments, particularly in its Food business, highlight its resilience and adaptability. The upcoming trading statement and annual results will provide further insights into the Group’s performance and strategic direction. As WHL continues to navigate these turbulent times, stakeholders will be keenly watching its next moves and their impact on the Group’s financial health and market position.