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There is a $110 million reason why Brad Banducci's success in Woolworths' grocery aisle is not reflected in the company's bottom line.
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Supermarket chain Woolworths has beaten rival Coles in sales growth for the first time in over 7 years.
But earnings before interest and tax plunged by a massive 14.5 per cent, thanks to the "reinstatement of team incentive payments", training and costs related to the retailer's store renewal and tech investments, said Banducci.
A bit of digging showed that most of the emphasis should have been on "team incentive payments" which totalled $110 million for the half year, and could add up to another $40 million in the six months to June.
Woolworths told Fairfax Media that "approximately 17,000 team members across all levels of Woolworths will be eligible for the bonuses.
Given the success Woolworths has had in finally turning around the performance of its core business, the issue of the massive bonus was "a good problem to have I suppose," Banducci told Fairfax Media.
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To put the $110 million bonus in perspective, Woolworths shaved more than $130 million off the food division's EBIT for the December year.
At least the market liked it. Woolies shares rose strongly at the prospect that the market giant might have finally fixed its core business - and the bonuses are a temporary affliction for investors.
Woolworths' chief executive Brad Banducci has restored sales growth in supermarkets - but it came at a cost to profits.
Photo: Peter Rae
But if you wanted to look for unambiguously good news for investors from the Woolworths result delivered on Wednesday, it came from the ugly stalwarts - the pubs and pokies joint venture, ALH, and the liquor division.
Both divisions managed to increase EBIT by 3.1 per cent each for the half year, but it was not enough to offset the earnings drop from the grocery business.
Woolworths' booze business - which includes the BWS, Dan Murphy's and Cellarmasters chains - has been a bright spot in the result. Photo: Peter Rae
The company has renamed its liquor business Endeavour Drinks Group - just in case someone mistook it for Woolworths, the very wholesome fresh food people.
"Liquor is a dated term. 'Drinks' is more aligned to the social atmosphere our customers want to associate with beer, wine, cider, RTD and glass spirits," Woolies executive Rose Scott said before the big change last June.
"This means no more Woolworths and no more Liquor."
And no more hardware of course. Masters managed to add another $117.6 million EBIT loss to Woolworths' bottom line.
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