Woolworths : Half Year Results Announcement

For personal use only

23 February 2022

ASX Market Announcements Offce

Australian Securities Exchange

20 Bridge Street

Sydney NSW 2000

Half-Year Results Announcement

Attached for release to the market is the Half-Year Results Announcement for the

period ended 2 January 2022.

Authorised by: Kate Eastoe, Group Company Secretary

For further information contact

Investors and analysts	Media
Paul van Meurs	Woolworths Press Offce
Head of Investor Relations	[e-mail]
[phone]	[phone]

Woolworths Group Limited ABN 88 000 014 675

1 Woolworths Way, Bella Vista NSW 2153

F22 Half-Year Profit and Dividend Announcement

For personal use only

For the 27 weeks ended 2 January 2022

Group Sales	eCommerce Sales	Group EBIT 1	Group NPAT1	Dividend per Share
$31,894m	$3,487m	$1,382m	$795m	39c
8.0% 1YR, 9.3% 2YR2	48% 1YR, 69% 2YR2	11.0% 1YR, 1.9% 2YR1	6.5% 1YR, 6.8% 2YR1	26.4%, 2.5%1

Strong Christmas performance, focused on a more consistent operating rhythm in H2

Woolworths Group CEO, Brad Banducci, said: "While the far-reaching impacts of COVID resulted in one of the most challenging halves we have experienced, we ended H1 strongly with positive trading momentum and helped our customers enjoy a much-needed Christmas celebration and festive holiday season. Omicron created new challenges in early January with a record number of team members isolating and material supply chain and stock flow issues. However, having learned from the Delta outbreak, we responded with agility and are gradually moving into a more consistent operating rhythm.

"Group sales2 grew strongly in H22, increasing by 8.0% (2-yr CAGR: 9.3%). Excluding PFD and Quantium, sales increased

by 4.2%. Group EBIT1 declined by 11.0% (2-yr CAGR: +1.9%) reflecting the challenging operating environment in Australian Food which led to higher direct and indirect COVID-related costs and BIG W store closures. Group NPAT1 declined by 6.5% (2-yr CAGR: +6.8%).

"While the focus during the half was firmly on our customers, team, and the broader community, we made good progress on our strategic agenda by selectively investing in building out our connected customer proposition, successfully transitioning from ownership to partnership with Endeavour Group and establishing our Advanced Analytics platform (Q-Retail) in partnership with Quantium. In H2, we remain focused on care for our customers and team, restoring our operating rhythm to realise process improvement benefits and managing the impact of inflation across our end-to-end value chain."

H22 key financial metrics

		H22		H21
$ MILLION		(27 WEEKS)		(27 WEEKS)	CHANGE
Continuing operations before significant items
Sales		31,894		29,535	8.0%
EBIT		1,382		1,554	(11.0)%
NPAT attributable to equity holders of the parent entity		795		850	(6.5)%
Basic EPS (cents)		64.3		67.8	(5.1)%
Group before significant items (including Endeavour Group in H21)
Sales		31,894		35,885	(11.1)%
EBIT		1,382		2,092	(33.9)%
Group after significant items
NPAT attributable to equity holders of the parent entity		7,063		1,135	n.m.
Basic EPS (cents)		571.0		90.5	n.m.
Dividend per share (cents)		39		53	(26.4)%
Dividend per share (cents) - excluding Endeavour Group		39		40	(2.5)%
1 Continuing operations before significant items	2 Continuing operations only

1 Woolworths Group Limited ABN 88 000 014 675

H22 Group highlights

For personal use only

Strong Christmas performance, focused on a more consistent operating rhythm in H2

Brad Banducci continued, "In Australian Food, total sales growth was solid at 3.4% (2-yr CAGR: 7.1%) but moderated over

the half as lockdowns eased before strengthening in late December. EBIT declined by 7.6% (2-yr CAGR: +2.6%) to $1,217 million reflecting the higher operating costs caused by COVID and a delay in implementing productivity initiatives. Customer scores were impacted by on-shelf availability as a result of supply chain disruption, but pleasingly, our market share and brand and reputation scores remained strong. A particular highlight is that our customer metric measuring whether our customers felt cared for remained consistently high across all Group businesses.

"Woolworths Retail sales increased by 3.2% (2-yr CAGR: 7.0%) with strong eCommerce growth offsetting a small decline in store-originated sales (-0.7%) as customers shifted back to in-home consumption due to COVID outbreaks. Sales growth slowed initially in Q2 as many COVID restrictions were lifted in NSW and Victoria, but ended the half strongly due to a late and strong Christmas. We were able to help our customers enjoy a much-needed Christmas and festive season through a focus on stock flow and a strong Woolworths Food Company seasonal product range.

"WooliesX B2C eCommerce sales growth was strong at 50.5% (2-yr CAGR: 75.9%) with higher demand due to COVID restrictions and material increases in both Home Delivery and Direct to boot capacity. Penetration was 10.8% of sales for the half but reached 15% of sales in NSW during Q1, placing enormous pressure on our teams. Pick up mix remained high at 39.2% in Q2 with the continued growth of Direct to boot, reflecting the convenience of the service and material capacity increases. eCommerce profitability improved materially but remains below the Australian Food average margin.

"Other WooliesX highlights included record visits to our digital platforms driven by app usage, good momentum in Cartology and progress in creating connected and personalised customer experiences. A particular highlight was the ongoing growth in Everyday Rewards with over a million weekly active app users and successful Save for Christmas and Team Thank You campaigns.

"Metro Food Stores returned to growth in the half with sales increasing 7.2% (2-yr CAGR: flat) due to store growth and strong sales in neighbourhood food stores. CBD and transit stores remain materially impacted by lower foot traffic.

"In October, we announced a new reporting segment called Australian B2B to reflect our investment in PFD Food Services, partnership services with Endeavour Group, and the expected growth of our other B2B businesses. While not directly comparable to the prior year, Australian B2B sales increased by 213.4% to $1,979 million with EBIT of $18 million. All B2B businesses reported higher revenue than the prior year.

"In New Zealand Food, total sales increased by 8.3% (2-yr CAGR: 6.5%) driven by new lockdown restrictions from mid-

August as well as higher inflation. EBIT increased by 3.3% (2-yr CAGR: 3.9%) with growth impacted by higher costs of operating in a COVID environment. eCommerce sales increased by 22.6% to 13.5% of total sales.

"BIG W's sales and EBIT were materially impacted by store closures in NSW and Victoria during the half. Sales growth on a two-year basis remained strong at a CAGR of 4.5% but declined by 9.0% compared to the prior year. EBIT declined by 81.2% (2-yr CAGR: -29.3%) to $25 million due to lower sales. eCommerce sales increased by 69.4% with growth and penetration moderating in Q2 as stores in NSW and Victoria reopened.

"Other now includes Woolworths Group's investments in Endeavour Group and Quantium. Quantium had a strong H1, signing new partnerships with Asda and Telstra. We also made good progress on our Advanced Analytics Roadmap with the establishment of Q-Retail to bring together Woolworths Group and Quantium's retail analytics capabilities into one cohesive team. The use of advanced analytics to optimise promotional activity and further our range localisation strategy is delivering promising results. In total, Other costs were $69 million, $17 million below the prior year.

"Significant items in H1 include the gain on demerger of Endeavour Group of $6,387 million and a post-tax charge of $119 million, primarily related to hourly team member remediation costs identified as part of our end-to-end payroll review.

"Achievements against our Sustainability Plan 2025 included a 6.0%1 decrease in Scope 1 and 2 emissions compared to the prior year driven by continuing improvements in electricity and refrigerant consumption, as well as the ongoing decarbonisation of the national grid. We also achieved a twelve-month rolling Group Safety Severity Rate of 1.88, better than our benchmark.

"In summary, it was a challenging half for our customers and team, and this was reflected in our customer scores and financial performance. But despite the various disruptions, we were able to continue our focus on building a better business and I am confident we will return to a more consistent operating rhythm and financial performance in H2. I would like to thank our team and our partners for their incredible efforts and care in delivering for our customers during the half."

2 Woolworths Group Limited ABN 88 000 014 675

For personal use only

Woolworths Group Chairman, Gordon Cairns, said: "I am proud of the efforts of our team in providing Australians and New Zealanders with their food and everyday needs while keeping our team and customers safe. Reflecting the Group's financial strength, we were able to return $2 billion to shareholders through a share buy-back following the successful demerger of Endeavour Group in late June. The Board has declared an interim dividend of 39c. Excluding the 13c related to Endeavour Group in H21, the dividend is broadly in line with the prior year. I remain confident that Woolworths Group is well positioned to deliver for our customers, team and shareholders in the years ahead."

1 Excludes Endeavour Group, PFD and Quantium; excludes transport and stationary fuel

3 Woolworths Group Limited ABN 88 000 014 675

H22 Group highlights

Progress against Woolworths Group priorities over the half

personal use only

Better together for a better tomorrow

• First Nations Advisory Board established; strategy endorsed by Woolworths Group Board
• Ranked healthiest Supermarket Own Brand range (The George Institute) for third consecutive year
• Group Christmas Thank You payment to all team members of $34 million
• Maintained strong Reputation and VOC NPS Customer Care metric across all retail businesses
• More to do to complete end-to-end payroll review and remediate team members

Reimagine our Food retail proposition

• Completed 28 store Renewals in Australia and New Zealand despite COVID challenges
• CORE/VALUE/UP store tailored range and space activated in 30 categories, new UP format in development for Double Bay and VALUE format in Miller, NSW
• Second tailored Community Supermarket opened in Rhodes, NSW; multicultural ranges live in 180 stores
• RT3 (new rostering & store standards tool) rolled out to SA, NT and ACT, with national rollout to be completed in F23
• More to do to restore consistent operating rhythm and reset end-to-end stock flow in H2

Connect our customer experience for good

food and more everyday

• 653 Woolworths Supermarkets now offering Direct to boot services, material increase in Home Delivery capacity; Drives and eLockers in 56 stores in New Zealand
• BIG W's digital acceleration continued in H1 with record eCom penetration of 32% in August due to store closures
• Active weekly App users up 50% in Dec vs prior year
• Opening of fourth eStore in Maroochydore, Qld
• More to do to embed eCommerce capacity increases and improve our customer experience

Activate Everyday for our customers

• Continued increase in Everyday Rewards members and scan rates, with 13.3 million members at end of half
• Everyday Rewards App reached record level of over 1 million weekly active users in Q2
• Delivery Unlimited subscription plan relaunched with >60% increase in subscribers
• Launch of Everyday Market in September, providing customers with a curated online marketplace
• More to do to roll out Real Time Loyalty Platform, Everyday Pay and continue to grow Everyday Market

For

Grow Food into B2B channels

• Established a new operating segment, Australian B2B, reflecting the changing shape of Woolworths Group
• Solid performance from PFD despite challenging operating environment
• Successful transition to partnership with Endeavour Group
• Primary Connect 3rd party continues to grow; completed roll out of 26 MetroGo stores in partnership with Ampol
• More to do to embed new operating model and scale new businesses

Evolve our stores, supply chain and business

platforms for the future

• MSRDC achieved record volumes during the half
• Heathwood DC, Qld opened ahead of schedule; Palmerston North DC and Hilton meat plants opened in New Zealand
• Strong growth from Cartology in Australia and New Zealand
• Successful launch of Q-Retail; pleasing progress on Advanced Analytics Roadmap
• More to do to deliver on Primary Connect investments and continue to grow Cartology and Quantium

4 Woolworths Group Limited ABN 88 000 014 675