Supermarket giant Woolworths has been delisted on the Australian stock market this morning after revealing a worrying cost shock.
Shareholders were saving supermarket giant Woolworths on Tuesday after the company slashed its earnings forecast to $220m on the Covid cost blow and soft 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 investors acknowledged that the coronavirus had wreaked havoc on its supply chain.
Compounding Woolies’ crisis during the second quarter was a slump in supermarket sales as shoppers returned to normal shopping habits after the lockdown.
Online sales were almost entirely behind the 3 percent increase in supermarket sales for half, meaning in-store sales increased.
Chief Executive Brad Banducci said, “The first half of (the 2022 fiscal year) has been one of the most challenging phases we have experienced in recent memory due to the far-reaching effects of the COVID delta stress.”
The company also added inclement weather and continued decline in tobacco sales to the list of reasons for its revised first half earnings outlook.
Mr Banducci said a wet spring and early summer had reduced “outdoor recreational opportunities”, echoing comments made by retailer Best & Lace in terms of the impact of poor climate conditions.
Additional costs incurred by businesses are expected to come down significantly after the holiday season, he said, although supply chain pain could remain if demand remains strong.
In terms of the financial blow, Woolies’ first-half earnings are now set to come in between $1.19bn and $1.22bn for the July to December period, compared to $1.31 billion a year ago.
Shares of Woolworths were trading at $36.26, down more than 10.6 percent on Tuesday, their lowest since May.
At its nadir the company’s market capitalization fell from approximately $45bn to over $40bn.
At 12.30 pm AEDT Woolies was trading 8.1 per cent down at $37.27.
The setback was in part the news that Woolworths stores were thriving well into the Christmas trading period, although specialty items are quickly flying off shelves.
“Our team is working hard to ensure that our customers have access to everything they need to make this a special Christmas,” said Mr. Bandusi.
Woollys also had better news for its Big W division, with sales momentum improving as stores in NSW and Victoria reopened to customers during October.
Nonetheless, four months of lockdown and store closures mean Big W’s first half earnings are still lower than last year’s
Figures between $20m and $30m are expected, down $133m from the first half of the 2021 fiscal year.
The company’s first-half results will also include bonus Christmas payments of between $35m to $40m to its employees.