2 Supermarket Giants on a downtrend - Woolworths and Wesfarmers

Woolworths Group Limited (WOW)Â

Woolworths shares were initially dragging the Australian share market lower, but later slipped down 0.98% to $29.31 by mid-day trading on August 20, 2018, despite posting 12.5% jump in profit for Fiscal Year 2018. Retail giant posted $1.7 billion profit for the year ending 30 June 2018, an increase of 12.5% on previous corresponding year. Revenue was up by 3.5% to $57.2 billion as Metro sales grew in double digit, WooliesX headed for digital enhancements and BIG W is taking a turnaround.

Australian supermarket sales grew 4.3 per cent, while Comparable sales at Woolworths' bottle shop chains grew 3.6 per cent. However, their earnings growth confined to 9.6 per cent and 2.8 per cent, respectively.

But Woolworths’ Australian food business observed slow momentum in sales at the start of FY19 as customers backflipped by plastic bags bans while rival, Coles bagged attention with Little Shop miniature.

The annual ordinary dividend yield of the retailer is 93 cent per share with the final dividend of 50 cents per share, fully franked. Woolworths’ alliance with Caltex benefitted the investors with special dividend of 10 cents per share as co-branded fuel outlets allowed for standard cost reduction. Though customers’ satisfaction was high during the year, investors seem to be unsettled on Woolworths’ FY18 performance as they stocked down on early trade.

Wesfarmers Limited (WES)

Wesfarmers dropped down by 1.55% to $51.715 as company goes ex-dividend on Monday, 20 August 2018. That means buyers no longer have the right to receive the most recently declared dividend, which is nothing less than annual yield of 223 cents per share for FY18.

In FY18 results declared last week, company posted striking decline of 58.3% in Net Profit After Tax to $1.2 billion, mainly driven by $1.65 billion loss from Bunning UK and Ireland venture.

Group’s earnings before interest and tax was $2.8 billion, down 36.5% in comparison to previous year. The hardware chain reported earnings before interest and tax of $1.5 billion, an increase of $0.17 billion from last year. Earnings for BANZ increased 12.7% to $1.5 billion with revenue growth of 8.9%.

The group’s department stores presented mixed results where Kmart sales was up 8% while Target sales dropped down by 4.7%. Coles’ Little Shop giveaway has given butterflies to peer retailers on supermarket frontiers but in recent results failed to show earnings growth, posting EBIT of $1.5 billion in FY18, down from $1.6 billion in FY17.

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