Woolworths Holdings Limited · JSE:WHL
Woolworths — FY2024 Earnings Presentation
69 slides from Woolworths's earnings presentation, September 2024
Slide 1: Annual Results FY24
WOOLWORTHS HOLDINGS LIMITED ANNUAL RESULTS FY24
Slide 2: Presentation Outline
PRESENTATION OUTLINE 01 02 03 04 OVERVIEW OF FINANCIAL STRATEGIC OUTLOOK THE YEAR OVERVIEW UPDATE AND Q&A
Slide 3: Overview of the Year
OVERVIEW OF THE YEAR Roy Bagattini Group CEO
Slide 4: Overview of the Year
OVERVIEW OF THE YEAR Excellent Food performance mitigated by lower contributions from apparel businesses, impacted by challenging macro, particularly in Australia • Group result impacted by tough trading conditions and record high prior-year performance • Turnover and concession sales +4.3% | aEBIT
Slide 5: The Good Business Journey
THE GOOD THE GOOD THE GOOD WE’RE DEDICATED TO SHAPING A BETTER WORLD THAT BENEFITS US DEDICATED WE’RE ALL, TO SHAPING A BETTER WORLD THAT BENEFITS WE’RE US BUSINESS OUR GOODJOURNEY BUSINESS BUSINESS JOURNEY JOURNEYBUSINESS GOOD HIGHLIGHTS JOURNEY WHILE BUILDING A BUSINESS THAT REMAINS RESILIENT FOR
Slide 6: Our Good Business Journey
OUR GOOD BUSINESS JOURNEY Our Good Business Journey (GBJ) is embedded in everything we do, and is a key differentiator for us • Aligned with our vision to be one of the world’s most responsible retailers, sustainability is deeply entrenched in our business, and has been for decades • Numerous GBJ ac
Slide 7: Woolies Youth Makers
MAKERS SUPPORTING YOUTH-OWNED BUSIN SUPPORTING YOUTH-OWNED ISABEL BOTHMA ISA B JEWELLERY DESIGNS MAKOMBORERO MUTEZO THE HUNGRY MUTE NOMPUMELELO NHLAPHO GADAT HOUSE ENZOʼS MIGHTY BITES BUSINESSES SIM CELE & HELEN STUBBS MICHAEL LUDWIG HITTINGER MICHAEL LUDWIG STUDIOS UNATHI MGOLOMBANE DOBA.UPCYCLE WO
Slide 8: Financial Overview
FINANCIAL OVERVIEW Zaid Manjra Group Finance Director
Slide 9: Financial Overview for the Year
FINANCIAL OVERVIEW FOR THE YEAR Strong Food performance offset by weak result in apparel | Balance sheet and capital returns remain healthy CONTINUING OPERATIONS (52 WEEKS) Turnover and Adjusted Adjusted diluted Total concession sales EBIT HEPS dividend R76.4bn R5.8bn 375.4cps 265.5cps +4.3% on LY -
Slide 10: Absolute Pets Acquisition
ABSOLUTE PETS ACQUISITION Earnings accretive acquisition completed in Q4 • Acquisition of leading pet care retailer allows Woolworths to accelerate growth ambitions to become the pet care destination of choice • 93.45% acquired for R609m in cash • Complementary brand positioning • Well-established m
Slide 11: South African Macro Context
SOUTH AFRICAN MACRO CONTEXT Constrained macroeconomic fundamentals impacting consumer confidence and discretionary spend • Consumers remain under pressure even as 10.0 inflation slows 5.0 • Weak consumer confidence from sustained 0.0 high living costs 2019 2020 2021 2022 2023 2024 -5.0 • Declining r
Slide 12: Australian Retail Sector
AUSTRALIAN RETAIL SECTOR Further deterioration in trading conditions in the second half CONSUMER SENTIMENT INDEX 115 108.9 • Subdued economic growth, household savings 110 105 depleted to a 17-year low 100 95 • Consumer sentiment at near record lows, 90 85 below 90 for over 2 years – longest since 8
Slide 13: Sales Performance
SALES PERFORMANCE Group sales up 4.3%, slowing to 3.2% in H2 | WSA sales +6.7% | Food delivered strong above-market growth | FBH and CRG impacted by high cost of living and reduced disposable income % LY % LY % LY 10.0 9.6 4.0 – 9.0 8.4 8.0 2.2 2.0 (4.0) 6.0 – (5.0) 4.0 (0.4) (8.0) (2.0) (8.0) 2.0 (
Slide 14: Segmental Adjusted EBIT
SEGMENTAL ADJUSTED EBIT WSA aEBIT growth of 5.9% offset by CRG | Group aEBITDA -6.8%, reflecting impact of significant capital investments Adjusted EBITDA -6.8% Rm 8 000 -14.1% 6 784 6 000 5 829 WSA aEBIT +5.9% +12.3% -9.9% >100% -66.0% 4 000 3 343 2 976 1 953 2 000 1 760 151.0 51.3 101 223 – Group
Slide 15: Woolworths Food
WOOLWORTHS FOOD Exceptional result driven by market share gains and positive leverage from sales to EBIT Sector leading comp growth of 6.9%, notwithstanding trade disruptions | GP margin gains driven by optimised promotions, Value Chain efficiencies and reduced waste, despite price investments and g
Slide 16: Woolworths Fashion, Beauty, and Home
WOOLWORTHS FASHION, BEAUTY, AND HOME Ongoing focus on improving quality of topline | Improved GP margin sustained notwithstanding higher contribution from Beauty | aEBIT impacted by negative operating leverage Weaker H2 in Fashion impacted by late onset of winter | Strong beauty sales +16% | Higher
Slide 17: Country Road Group
COUNTRY ROAD GROUP Further decline in consumer sentiment and footfall in H2 impacting short-term profitability | aEBIT deleverage with GP margin dilution and higher costs Further deterioration in H2 trading conditions | GP margin impacted by weaker A$ and increased promotions | High fixed-cost base
Slide 18: Woolworths Financial Services
WOOLWORTHS FINANCIAL SERVICES Strong recovery underpinned by growth in revenue, lower impairments and good cost management Closing book +1.8% excluding legal book sale, driven by new accounts and advances | Impairment rate moderated to 7.0%; remains sector leading | Costs well managed to below last
Slide 19: Group Balance Sheet
GROUP BALANCE SHEET Balance sheet remains robust, notwithstanding investments and acquisition made over the period | Group well positioned for further investment in growth Net borrowings Lease liabilities • Net borrowings increased due to acquisition of Absolute Pets, increased strategic capital R5.
Slide 20: Capital Expenditure
CAPITAL EXPENDITURE Investing in growth initiatives and value chain capacity and capabilities Investment in store network (expansion and modernisation) | Capacity throughout the value chain (Value Chain Transformation (VCT), Midrand DC expansion) | Product innovation | Online, data and digital Rm FY
Slide 21: Cash Flow
CASH FLOW Positive free cash flow of R2.6bn, notwithstanding higher maintenance capex, increased finance costs and employee share-plan purchases | Healthy cash conversion ~95% Rm 10 000 9 510 91 8 000 (949) (1 571) 6 000 (637) (911) 4 000 (1 854) 2 631 2 000 (1 048) – (2 303) (2 000) (2 741) (581) (
Slide 22: Capital Allocation and Returns to Shareholders
CAPITAL ALLOCATION AND RETURNS TO SHAREHOLDERS Our focus on capital allocation remains central to investment decisions BALANCE SHEET INVESTMENT AND GROWTH SHAREHOLDER RETURNS • Strong balance sheet metrics • Acquisition of Absolute Pets • Total dividend of 265.5cps and a final supporting growth divi
Slide 23: FY25 Recent Trading and Outlook
FY25 RECENT TRADING AND OUTLOOK FOOD • H1 price movement forecast 5.0% - 5.5% • Net space planned at approximately +3% • First eight weeks trade in H1 +13.3% | +10.9% excluding Absolute Pets • Lower inflation, positive volumes FBH • H1 price movement forecast 5.0% - 5.5% • Net space expected to be b
Slide 24: Strategic Update and Outlook
STRATEGIC UPDATE AND OUTLOOK Roy Bagattini Group CEO
Slide 25: Reminder: Our Strategic Journey and Progress
REMINDER: OUR STRATEGIC JOURNEY AND PROGRESS We have made significant progress along our multi-phase strategic journey, shifting from “Fix, Strengthen and Reposition” to “Optimise, Invest and Grow”, albeit with each business at a different stage within this FASHION BEAUTY HOME CRG FOOD 1 2 3 FIX, ST
Slide 26: Reminder: Our Strategic Journey and Progress
REMINDER: OUR STRATEGIC JOURNEY AND PROGRESS We have made significant progress along our multi-phase strategic journey, shifting from “Fix, Strengthen and Reposition” to “Optimise, Invest and Grow”, albeit with each business at a different stage within this FASHION BEAUTY HOME CRG FOOD 1 2 3 FIX, ST
Slide 27: Country Road Group
COUNTRY ROAD GROUP After successfully concluding the sale of DJ, and then operationally separating DJ from CRG, we are now configuring CRG as a standalone, ‘House of Brands’ business FY2021 FY2023 FY2024 FY2025 PHASE ONE PHASE TWO PHASE THREE PHASE FOUR Operational Reconfigured Sale of properties Su
Slide 28: CRG – Growth Opportunities
CRG – GROWTH OPPORTUNITIES We will drive growth from reset foundations by leveraging CRG’s competitive advantages and unlocking the full potential of existing brands • Rapidly implementing a fit-for-purpose operating model, enabling a common platform of capabilities across brands, and sustainable st
Slide 29: Country Road Group Brands
COUNTRY ROAD GROUP BRANDS An aspirational Australian women’s fashion brand that unites a love of design with a contemporary view on sophisticated style. Designed for women and men who appreciate the beauty of simple, sophisticated collections that are modern in approach and classic in style One of A
Slide 30: Medium-Term aEBIT Margin Target: CRG
MEDIUM-TERM aEBIT MARGIN TARGET CRG > 10% Revised from >12%
Slide 31: Reminder: Our Strategic Journey and Progress
REMINDER: OUR STRATEGIC JOURNEY AND PROGRESS We have made significant progress along our multi-phase strategic journey, shifting from “Fix, Strengthen and Reposition” to “Optimise, Invest and Grow”, albeit with each business at a different stage within this FASHION BEAUTY HOME CRG FOOD 1 2 3 FIX, ST
Slide 32: Woolworths Fashion, Beauty and Home
WOOLWORTHS FASHION, BEAUTY AND HOME We will continue to drive the turnaround of our Fashion business with the next phase of this journey focusing on improving availability • Continuing to focus on the “right product at the right price” anchored in trusted Woolies value and quality • Further leveragi
Slide 33: Fashion Turnaround Priorities and Sequencing
FASHION TURNAROUND PRIORITIES AND SEQUENCING We have largely completed the first phase of our turnaround journey and are now pursuing our next biggest commercial opportunity – improving availability PHASE ONE PHASE TWO DEFINE THE MARKET, RIGHT PRODUCT AT RIGHT PRICE Trading RIGHT PLACE AND OUR POSIT
Slide 34: Value Chain Transformation
VALUE CHAIN TRANSFORMATION RECONFIGURED OUR BUSINESS TO CREATE Consolidation of supply base driving MOVING FROM A “PUSH” TO A “PULL”, A FUTURE-STATE OPERATING MODEL fabric synergies and CENTRALISED INVENTORY MODEL improved input costs right product | right place | right time | right quantity 2 CENTR
Slide 35: WEdit
WEDIT
Slide 36: Woolworths F | B | H – Growth Opportunities
WOOLWORTHS F | B | H – GROWTH OPPORTUNITIES We see significant scope for growth in our smaller format WEdit stores, Online, existing African markets, and Beauty • Driving momentum in online channel • Expanding presence in existing African markets • Accelerating roll-out of WEdit, with particular foc
Slide 37: WBeauty Manufacturing Plant
WBEAUTY MANUFACTURING PLANT
Slide 38: First Woolworths Beauty Standalone Store (Waterstone)
FIRST WOOLWORTHS BEAUTY STANDALONE STORE (WATERSTONE)
Slide 39: Medium-Term aEBIT Margin Target: F | B | H
MEDIUM-TERM aEBIT MARGIN TARGET F | B | H > 14%
Slide 40: Reminder: Our Strategic Journey and Progress
REMINDER: OUR STRATEGIC JOURNEY AND PROGRESS We have made significant progress along our multi-phase strategic journey, shifting from “Fix, Strengthen and Reposition” to “Optimise, Invest and Grow”, albeit with each business at a different stage within this FASHION BEAUTY HOME CRG FOOD 1 2 3 FIX, ST
Slide 41: Woolworths Food
WOOLWORTHS FOOD We continue to strengthen our “holy grail”: The sweet spot which balances giving our customers the best overall proposition in the market, and our shareholders the highest return on capital in the sector • Continuing to grow our core business - attracting 6% more VIP customers in FY2
Slide 42: Next Generation Stores
“NEXT GENERATION” STORES WHL FLOWERS are UARA! to last that’
Slide 43: Woolies Dash
WOOLIES DASH WHL Asay ‘cont =) OOLIES DASH IS NO’ IN EVEN MORE AREAS GET WOOUIES FOOD DELIVERED IN 8% Delivering to Rivonia Rd, Sandton, JHB ‘STAY-COLD COOLERS FAST, FRESH, TODAY GREENTO @
Slide 44: Woolworths Food – Growth Opportunities
WOOLWORTHS FOOD – GROWTH OPPORTUNITIES We are accelerating our growth in a number of adjacent categories and formats, leveraging and investing in our world-class back-end capabilities • Pursuing growth in new categories, formats and adjacencies housed under Woolworths Ventures – our growth accelerat
Slide 45: Food Services
FOOD SERVICES WHL
Slide 46: WCellar
WCELLAR WHL
Slide 47: Absolute Pets
ABSOLUTE PETS WHL
Slide 48: Midrand Distribution Centre (Gauteng)
MIDRAND DISTRIBUTION CENTRE (GAUTENG)
Slide 49: Medium-Term aEBIT Margin Target: Food
MEDIUM-TERM aEBIT MARGIN TARGET FOOD > 7%
Slide 50: Outlook
OUTLOOK Notwithstanding macro headwinds, we will continue to invest in existing as well as new opportunities, leveraging our solid foundation to optimise and grow our businesses • In South Africa, prospects appear more positive following the national election and the formation of the Government of N
Slide 51: Thank You!
THANK YOU! to our customers for your loyalty and trust, and to all our suppliers, partners and teams for your remarkable commitment, dedication and passion
Slide 52: Appendix
APPENDIX
Slide 53: Appendix Contents
APPENDIX CONTENTS • GROUP PERFORMANCE • GROUP INCOME STATEMENT • GROUP BALANCE SHEET • INCOME STATEMENTS BY BUSINESS • IFRS 16 - IMPACT BY BUSINESS • CAPITAL EXPENDITURE • NET BORROWINGS/(CASH) • AUSTRALIAN BALANCE SHEETS • TRADING SPACE • STORE LOCATIONS
Slide 54: Group Performance
GROUP PERFORMANCE Continuing operations H2 - 26 weeks Full year - 52 weeks Turnover and R38.2bn R76.4bn concession sales +3.2% on LY +4.3% on LY Adjusted profit before tax R1.9bn R4.5bn -25.3% on LY -18.3% on LY Adjusted EBIT R2.6bn R5.8bn -19.9% on LY -14.1% on LY Adjusted diluted HEPS 375.4cps -12
Slide 55: Group Income Statement
GROUP INCOME STATEMENT 52 weeks 52 weeks Jun 2024 Jun 2023 % Rm Rm change Strong Food growth offset by Turnover and concession sales 76 360 73 228 4.3 weaker apparel growth Gross profit 27 027 26 826 0.7 Adjusted EBITDA 9 019 9 681 (6.8) WSA +5.9%, offset by CRG and unallocated Adjusted EBIT 5 829 6
Slide 56: Group Balance Sheet
GROUP BALANCE SHEET Constant Jun 2024 Jun 2023 currency Rm Rm % change Assets • Includes Absolute Pets brand and goodwill Property, plant and equipment, recognised on acquisition investment property and intangible assets 17 408 15 801 11.4 • Investment in capacity and capability Right-of-use assets
Slide 57: Woolworths Food: Exceptional result through market share gains
Exceptional result delivered through market share gains and positive leverage from sales to EBIT 52 weeks 52 weeks H2 2024 H2 Jun 2024 Jun 2023 % Rm % Rm Rm change Turnover and concession sales 24 288 9.6 47 199 43 292 9.0 Gross profit margin 24.8% 24.7% 24.4% Expenses 4 247 8.5 8 250 7 520 9.7 Adju
Slide 58: Fashion, Beauty and Home: Topline and profitability impacted by macro
Topline and profitability impacted by macro, notwithstanding continued focus on improving quality of sales 52 weeks 52 weeks H2 2024 H2 Jun 2024 Jun 2023 % Rm % Rm Rm change Turnover and concession sales 7 100 (2.9) 14 708 14 762 (0.4) Gross profit margin 49.0% 48.5% 48.5% Expenses 2 625 0.6 5 333 5
Slide 59: Country Road Group: Consumer sentiment impacting profitability
Further decline in consumer sentiment impacting profitability 52 weeks 52 weeks H2 2024 H2 Jun 2024 Jun 2023 % A$m % A$m A$m change Turnover 524.6 (11.3) 1 116.8 1 214.5 (8.0) Gross profit margin 58.2% 60.3% 62.6% Expenses 309.9 0.8 633.1 611.2 3.6 Adjusted EBIT 1.1 (98.1) 51.3 151.0 (66.0) Adjusted
Slide 60: Woolworths Financial Services: Revenue growth and lower impairments
Strong result underpinned by growth in revenue and lower impairments Jun 2024 Jun 2023 % Rm Rm change Average total financial services assets 15 796 14 831 6.5 % % Income statement to book to book Net interest income 1 932 12.2 1 713 11.6 12.8 Impairment charge 1 103 7.0 1 078 7.3 2.3 Risk-adjusted
Slide 61: FY24 Group Segmental Income Statement
FY24 GROUP SEGMENTAL INCOME STATEMENT Woolworths Country Road Food FBH Logistics WFS Group Treasury Intragroup Group Jun 2024 Rm Rm Rm Rm Rm Rm Rm Rm Turnover and concession sales 47 199 14 708 736 – 13 717 – – 76 360 Concession sales (991) (210) – – – – – (1 201) Turnover 46 208 14 498 736 – 13 717
Slide 62: FY23 Group Segmental Income Statement
FY23 GROUP SEGMENTAL INCOME STATEMENT Woolworths Country Road Food FBH Logistics WFS Group Treasury Intragroup Group Jun 2023 Rm Rm Rm Rm Rm Rm Rm Rm Turnover and concession sales 43 292 14 762 684 – 14 490 – – 73 228 Concession sales (829) (133) – – – – – (962) Turnover 42 463 14 629 684 – 14 490 –
Slide 63: IFRS 16 – Impact by Segment
IFRS 16 – IMPACT BY SEGMENT Group WSA CRG Lease liabilities Rm Rm A$m Jun 2023 11 002 6 491 371 Jun 2024 10 304 6 284 341 Average remaining lease term (years): Jun 2023 4.5 6.4 2.3 Average remaining lease term (years): Jun 2024 4.1 5.2 2.0 Average remaining lease term with no options (years): Jun 20
Slide 64: Capital Expenditure
CAPITAL EXPENDITURE Depreciation and amortisation Rm 52 weeks 52 weeks % 3 500 Jun 2024 Jun 2023 change R3.2bn R3.2bn Woolworths (Rm) 980 861 13.8 2 800 Country Road Group (A$m) 39 30 30.0 R2.5bn Pre IFRS 16 (Rm) 1 459 1 223 19.3 Right-of-use assets (Rm) 1 731 1 674 3.4 2 100 Total (Rm) 3 190 2 897
Slide 65: Net Borrowings/(Cash)
NET BORROWINGS/(CASH) Net borrowings/(cash) Jun 2024 Jun 2023 R6.1bn WHL Net debt/(cash) (Rm) 5 569 2 529 Interest-bearing debt 6 686 5 825 R4.4bn Net cash and cash equivalents (1 117) (3 296) Unutilised committed facilities – Group 5 142 6 371 WSA Net debt (Rm) 6 050 4 395 (A$39m) Interest-bearing
Slide 66: Australian Balance Sheets
AUSTRALIAN BALANCE SHEETS Jun 2024 Jun 2023 A$m A$m Country Country Road Osiris Road Osiris Group Holdings Total Group Holdings Total Assets Property, plant and equipment and investment property 119 140 259 114 140 254 Intangible assets* 319 – 319 364 – 364 Right-of-use assets 277 – 277 305 – 305 In
Slide 67: Trading Space
TRADING SPACE Projected Projected Projected Jun 2023 % Jun 2024 % Jun 2025 % Jun 2026 % Jun 2027 000m2 change 000m2 change 000m2 change 000m2 change 000m2 Woolworths Fashion, Beauty and Home 432.1 (0.2) 431.1 0.4 432.7 0.9 436.6 0.4 438.2 South Africa 385.7 (0.4) 384.3 (0.3) 383.1 0.1 383.6 (0.5) 38
Slide 68: Store Locations
STORE LOCATIONS Projected Projected Projected Jun 2023 Growth Jun 2024 Growth Jun 2025 Growth Jun 2026 Growth Jun 2027 Woolworths Fashion, Beauty and Home 268 22 290 14 304 19 323 15 338 South Africa 204 21 225 11 236 12 248 6 254 Rest of Africa 64 1 65 3 68 7 75 9 84 Woolworths Food 479 172 651 45
Slide 69: Disclaimer
DISCLAIMER Shareholders are advised that the information in this presentation has not been reviewed and reported on by Woolworths Holdings’ external auditors and it does not constitute a profit forecast. Woolworths Holdings has taken reasonable efforts to ensure the accuracy and completeness of the