Woolworths Holdings Ltd (WHL) today announced results for the 52 weeks ended 24 June 2018. Group sales increased by 1.6% to R75.5 billion. Adjusted pre-tax profit was down 13.8% to R4.8 billion. Headline earnings per share (HEPS), which excludes the David Jones impairment of A$712.5 million as well as last year’s A$172.6 million profit on the sale of the David Jones Market Street property, decreased by 17.7% to 346.3cps. Earnings per share (EPS), which includes both the impairment charge and last year’s property sale, decreased by 165.2% to -269.5cps.

Commenting on the results, WHL Group CEO, Ian Moir, said, “2018 has been a difficult year. Significant costs and disruption from transformation initiatives in David Jones and poor performance in our fashion business in South Africa have led to a result for the Group that is disappointing. This was exacerbated by challenging economic and trading conditions in both markets.

“Our Woolworths Foods business again delivered an outstanding performance, gaining market share for the 8th consecutive year, and Mimco, Politix and Witchery all turned in excellent results. We have now completed our major transformational initiatives in David Jones and are already starting to see the benefits come through in improved sales momentum from H2 into the first seven weeks of the new financial year.”

Woolworths Food

Woolworths Food continued to outperform the market, with sales growth of 8.4% with comparable store sales growth of 4.8%. Gross margins were maintained despite increased competition. This has been achieved through the continued delivery of quality, innovative product at an attractive price point.

Woolworths Fashion, Beauty and Home

Woolworths Fashion, Beauty and Home business saw sales decline by 1.5% for the year, with comparable store sales 4.1% lower. Gross margins declined by 1.2%. Our womens’ modern range failed to resonate with our core customer. The new international and private label ranges in Beauty introduced at the beginning of the year have now been rolled out across the store portfolio and have made a positive contribution in terms of revenue and footfall.

Woolworths Financial Services

The Woolworths Financial Services debtors’ book grew by 3.8%. The impairment rate for the twelve months ended 30 June 2018 reduced by 1.1% to 5.2%.

David Jones

The business experienced significant change during the year, including the implementation of new merchandise and finance systems, the re-platforming of its online systems, the launch of the new food initiative, a strategic cost review, and the move of its head office from Sydney to Melbourne. The costs and disruption of these initiatives impacted profitability. However, we saw an uplift in top line performance in the second half, with sales increasing 2.2% and 2.7% in comparable stores, and this momentum has continued into the new financial year, with sales for the first seven weeks up 3.7%.

Full year sales were 0.9% lower (and 0.4% lower in comparable stores). Online sales growth was 21.4% (up more than 50% since the launch of the new platform), and now comprise 5.3% of total sales. Gross margins were maintained despite the promotional environment due to sourcing and logistics efficiencies

Country Road Group

Country Road Group had a mixed year. Strong performances from Witchery, Mimco and Politix, were offset by a weaker performance in Country Road womenswear, resulting in comparable store sales, which exclude Politix (acquired in November 2016), declining by 1.8%. Including Politix, sales increased by 1.7% for the year. Net retail space grew by 2.5%.

Online sales growth was 20.8%, with online sales now comprising 18.0% of total Australian sales. Gross margin improved by 2.5% due to focus on full-priced sales and reduced promotions.

The Board has declared a final dividend of 130.5 cents a share. This brings the total dividend for the year to 239.0 cents per share (2017: 313 cps).