Woolworths To Bring Down Food Prices and Reward Shareholders

  • Nov 21, 2018 AEDT
  • Team Kalkine
Woolworths To Bring Down Food Prices and Reward Shareholders

Woolworths (ASX: WOW) pedals further move to free up its funds for bringing down the food prices and returning capital to shareholders.

Chairman Gordon Cairns stated that supermarket company Woolworths has been spending substantial capital expenditure since past few years, to push its investment in respect of on store refurbishment and supply chain improvements but now the company plans to cut back its capex to reward shareholders and reducing household food bills.

Mr. Cairns added that company’s shareholders could be rewarded in terms of return on capital employed, earnings per share and total shareholders returns along with utilizing the franking credits available with the company.

Market analysts are expecting softening of competitive pressures in supermarket after Woolworths has recently invested $1 billion in prices and Coles’ has separated from Wesfarmers. 

Woolworth held its Annual General Meeting on Wednesday, 21 November 2018 which sent the Woolworths’ shares to trade at higher level. share price increased 1.227% to close at $28.870 on 21 November 2018.

Woolies’ 2018 AGM Presentation revealed that “Woolworths as a place to shop” has increased by +15 since June 2016. This reflects the wide range of improvement that company has introduced in its customer experience and service, including ease of pick up, queue wait times, product availability, and ease of moving around the store.

At the beginning of the month, the company reported its sales for the first quarter of the 2019 financial year with Group sales from Continuing Operations of $14.9 billion, up 1.9% on the same quarter last year.

At the back of increasing investment in Australian and New Zealand Food, the company has experienced a significant improvement in customer metrics with online growth reaching beyond 30%. Woolworths’ Australian food sales for Q1 FY19 was  $9.9 billion, an increase of 1.9% on the previous year and comparable sales momentum has shown marginal improvement in September compared to August leading to growth of 1.8% for the quarter.

In Fiscal 2018, Group’s NPAT from continuing operations was up 12.9% and Group EBIT from continuing operations was up 9.5% with all businesses delivering higher EBIT than the prior year. As a result, the company announced special dividend of 10 cents, taking the total FY18 dividend to 103 cents.

The Group has stated new priorities for Fiscal 2019 which includes building growth platforms for the future, advancing differentiation strategy in all its business and redesigning Woolworths’ E2E operating model. Further, ahead of Christmas season, the company intends to improve the performance of BigW and continue its investment in New Zealand’s full-service supermarket chain CountdownX.

Over the past one year, the stock of Woolworths Group Limited (ASX: WOW) has witnessed a positive performance change of 10.29% but in the last 3-months to date, it has fallen by 3.03%.


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