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  • Woolworths has turned a $1.75 billion profit for the 2019 financial year, up 7.2 per cent on last year
  • Sales are up 3.4 per cent at $59.9 billion and earnings before interest and tax up five per cent to reach $2.72 billion
  • A strong second half for the supermarket giant wasn’t enough to keep shareholders happy, however, with the company struggling to offset a weak performance from Big W and Endeavour Drinks
  • Woolworths has confirmed plans to close 30 unprofitable Big W stores over the next three years, and will cut ties with Endeavour Drinks and ALH Group in 2020

Shares in Woolworths are trying to climb back up from the red after taking a hit today following the release of the company’s 2019 financial year annual report.

The supermarket giant just tapped into the green in all major areas for the fiscal year, with overall sales up 3.4 per cent at $59.9 billion and earnings before interest and tax (EBIT) up five per cent to reach $2.72 billion.

Similarly, Woolworths has turned a $1.75 billion profit for the 2019 financial year, up 7.2 per cent on last year.

The profit increase comes from a strong second half of the financial year offsetting an underwhelming result from Big W stores and the recently-formed Endeavour Drinks division.

Shareholders, however, appear to have expected more from the company. Despite Woolworths hoisting final 2019 dividends almost 10 per cent to $1.02 per share over the year, the market still responded poorly to the report, with Woolworths’ shares dipping over two per cent this morning. Currently, shares are down 1.19 per cent and worth $35.75 each just before midday AEST.

The biggest strain on the company’s report was an underlying $85 million loss posted by Big W. While this is still an improvement on last year’s $110 million loss, taking into account a $371 million charge identified as part of the network review brings Big W’s statutory loss for the year to $456 million.

Woolworths has confirmed plans to close 30 unprofitable Big W stores over the next three years. The review of the store network is still ongoing, but so far three stores have been singled out for closure in the 2020 financial year.

Also tainting the annual report is a decrease in earnings for the Endeavour Drinks business, which is home to 1500 BWS and Dan Murphy’s stores around the country. Endeavour Drinks earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 4.1 per cent over the 2019 financial year, to $579 billion.

Yet, a silver lining for Endeavour Drinks is the 5.0 per cent increase in sales, increasing from $8.24 billion in 2018 to $8.66 billion in 2019.

Woolworths CEO Brad Banducci said the second half of the financial year was a major contributing factor to the mostly-positive annual report, seeing improved sales and earnings before interest and tax.

“Customer scores improved in the fourth quarter while sales and EBIT momentum improved in the second half,” Brad explained.

He said company management is pleased with the progress and momentum brought about in the 2019 financial year, but seemed slightly wary about market conditions for 2020.

“In F20, we expect the uncertain consumer environment and input cost pressures to remain as well as an impact from new enterprise agreements,” he said.

“However, we are well placed to respond to these challenges and are excited about what we can achieve together in F20”, he concluded.

The new financial year will also see Woolworths sever ties with its alcohol and hospitality businesses, as was announced at the beginning of July 2019.

The supermarket group plans to merge Endeavour Drinks and ALH Group to form a new entity called Endeavour Group, and then separate itself from the new business. While this means Woolworths could miss out on its slice of $1 billion in earnings, it means Woolworths will no longer be associated with the somewhat controversial gambling and alcohol markets.

The market responded well to this merger and subsequent separation in July, but only time will tell if the supermarket king can keep shareholders happy once it all comes to fruition.

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