The full extent of the pain at Woolworths is starting to emerge. Impairments and writedowns at the supermarket group now adds up to more than $4 billion.
Today the supermarket chain added another $959 million, the cost of restructuring, to the 2016 financial year results.
This is on top of $3.25 billion of impairments announced in February, including $1.9 billion on the hardware business, which has been losing about $200 million a year.
These writedowns add up to $4.2 billion for 2016. The full damage will be revealed late next month when Woolworths announces its full year results.
The Woolworths share price soared today despite the announcement of restructuring costs. A short time ago, the shares were up more than 8% to $24.33.
The costs, including the loss of 500 jobs and the closure of 30 stores, were announced by CEO Brad Banducci who was appointed in February with the job of lifting the flatlining sales growth.
He faces a market with more competition from discount chains, including Aldi. And while sales are stagnating at Woolworths, the latest quarterly results at main competitor Coles show growth of 5.9%.
“This will be a three- to five-year journey,” Banducci said today when announcing the job losses and store closures.
“While we have had to make some tough decisions and this has ramifications for many of our team, we are confident we are putting in place solid foundations for the future and early results give us confidence we are on the right track.”
Banducci expects 2016 full year 2016 year EBIT (earnings before interest and taxes) from continuing operations before significant items will be between $2.55 billion and $2.57 billion.
In February, Woolworths posted a loss of $972.7 million for the first half of the financial year, its first for more than 20 years, driven by a massive $1.9 billion write down in the value of the troubled Masters hardware business.
The main business also was weaker with sales dropping 1.4% to $32 billion. And Australian food and liquor sales were flat at $22.34 billion, up just 0.7% over the six months.