43% bump in e-commerce sales give Woolworths a leg up in FY20

Despite suffering the initial impact of COVID-19 due to stock capacity issues, Woolworths has reported online sales through WooliesX, the digital arm of its business, grew strongly for the full year ending 28 June 2020.

The company reported e-commerce sales grew by 43% on a normalised basis from AU$1.4 billion to AU$2 billion this financial year. This contributed to the company's total group sales of AU$64 billion, which grew 8% from AU$60 million last financial year.

Meanwhile, total group online sales lifted 42% to AU$3.52 billion during the full year.

"F20 was another transformative year for WooliesX," the company said on Thursday.

"Digital and e-commerce growth was already very strong but experienced a step-change in Q3 due to the onset of COVID-19.

"The surge in demand for e-commerce services initially impacted sales and the customer experience, but the business rapidly adapted and added capacity in Q4 to resume all normal services and provide additional capacity and convenience to customers."

As part of its COVID-19 response during the year, the company doubled its online capacity, opened 78 new home delivery stores, and accelerated the rollout of contactless pick up to 86 locations.

The supermarket giant also established partnerships with Sherpa, Drive Yellow, and Uber to get more online orders delivered to customers.

The company added the enhancements it made to the Woolworths app, including giving customers the ability to track orders, improving access to offers and points in-app, and enhancing its security and payment features, contributed to a growth in active user base to 860,000.

During the year, the company also launched its Everyday Rewards app. As a result, the company reported how member numbers grew 5.5% to 12.3 million by the end of June. In-store scan rates at its supermarkets lifted by 50%.

Woolworths Rewards reached 12.3 million members by the end of June, representing 5.5% growth year on year.

Despite the positive numbers online, Woolworths saw a drop in both net profit after tax and earnings before interest and tax (EBIT) for the full year, down 1.2% and 0.4% to AU$1.6 billion and AU$3.2 billion, respectively.

The business also noted that it estimates wage remediation will cost the business a total of AU$500 million.

Woolworths said as of June 28, it had made initial payments of AU$117 million, of which AU$104 million was paid to affected team members for the periods during FY15 to FY19, with the remaining related to payroll tax and other remediation costs.

A further payment of AU$141 million was made in July 2020, of which AU$134 million was paid to affected team members and the remainder was for payroll tax, Woolworths said.

Woolworths Group CEO Brad Banducci said looking ahead, while FY21 has been off to a "strong start", it will be difficult to predict the potential outcome.

"Unfortunately, we expect to be living and working with COVID for the foreseeable future … sales growth in the first eight weeks of F21 has been strong across all of our business except for hotels. However, the resurgence in COVID cases and increased restrictions, particularly in Victoria, has also led to higher costs to operate COVIDSafe," he said.

"For the first eight weeks, incremental COVID-related costs have been approximately AU$107 million (excluding typically higher team and supply chain costs due to higher sales volumes). Currently, we are assuming that some level of elevated sales and costs will continue for the remainder of H1 F21."

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