Supermarket giant Woolworths was wiped out in the Australian equity market this morning after revealing worrying spikes in costs.
Shareholders trashed supermarket giant Woolworths on Tuesday after the company slashed its profit forecast on a surge in $ 220 million Covid costs and weaker post-lockdown sales.
The company’s ASX-listed shares plunged $ 4.5 billion within 30 minutes of trading and were near their lowest level in six months after admitting to investors that the coronavirus had taken its toll on its supply chain.
The Woolies’ woes were compounded by lower supermarket sales in the second quarter as shoppers returned to normal shopping habits after the closings.
Online sales were almost entirely the source of a 3% increase in supermarket sales in the six-month period, meaning in-store sales growth slowed.
“The first half of (fiscal 2022) has been one of the most difficult semesters we have seen in recent memory due to the far-reaching impacts of the Covid Delta strain,” said Chief Executive Officer Brad Banducci.
The company also added a series of bad weather conditions and a continuing decline in tobacco sales to the list of reasons for its revised first-half profit outlook.
Mr Banducci said a wet spring and early summer had reduced “opportunities for outdoor entertainment,” echoing comments made by retailer Best and Less in terms of the impact of poor weather conditions.
He said the additional costs incurred by the business are expected to decrease significantly after the holiday season, although supply chain difficulties may persist if demand remains strong.
In terms of the financial blow, Woolies’ first-half profits are now expected to be between $ 1.19 billion and $ 1.22 billion for the July-December period, up from $ 1.31 billion a year ago. year.
Woolworths shares were at one point Tuesday down more than 10.6% to $ 36.26, the lowest since May.
At its lowest, the company’s market capitalization fell from around $ 45 billion to just over $ 40 billion.
As of 12:30 p.m., AEDT Woolies was still trading down 8.1% at $ 37.27.
Cushioning the blow somewhat was the news that Woolworths stores were well stocked as the key Christmas trading season approached, although specialty items were quickly flying off the shelves.
“Our team is working hard to make sure our customers have access to everything they need to make this Christmas a special Christmas,” Mr. Banduci said.
Woolies also had better news for its Big W division, with sales momentum improving with the reopening of NSW and Victoria stores to customers in October.
Nonetheless, four months of store closures and store closures mean Big W’s first half profits are set to fall further from last year.
A figure of between $ 20 million and $ 30 million is expected, well below the $ 133 million in the first half of fiscal 2021.
The company’s first-half results will also include a $ 35 million to $ 40 million Christmas bonus to its workforce.