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Woolies slumps on trading update

Woolworths Group shares took a beating on Tuesday following a trading update on its first-half trading performance for FY22.

Woolies told the market that the first half of FY22 has been one of the “most challenging halves experienced in recent memory due to the far-reaching impacts of the COVID Delta strain” and its impact on the company’s end-to-end stock-flow and operating rhythm.

Sales growth in supermarket giant’s Australian Food business were positive on a one-year basis and strong on a two-year basis, however, moderated in the second quarter following the easing of restrictions in NSW and Victoria.

Furthermore, the ongoing material costs of operating in a COVID environment have impacted expected earnings in the first half. COVID has had a significant impact on costs, even more so than FY21 due to the combination of both direct COVID-related costs, together with the indirect impacts. Including those seen across end-to-end supply chains, and the subsequent material inefficiencies caused in stores, distribution centres and transportation.

Woolworths reiterated that to recognise the efforts of the group’s front line teams across Australia and New Zealand, its first-half results will include a special Group Team Christmas Thank You bonus payment of $35 million to $40 million that was previously disclosed.

However, despite the various disruptions, Woolworths Group CEO, Brad Banducci, said: “We have made good progress activating our strategy and have continued to selectively invest in building out our customer proposition and broader retail ecosystem. As customer behaviours begin to normalise and COVID-related supply volatility reduces, we expect an improvement in our underlying operating performance and we will provide a more detailed update on the outlook for the remainder of F22 at our H1 results in late February.”

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