Later this month all eyes will be on the Woolworths Group Ltd (ASX: WOW) share price when it releases its full year results.
The conglomerate is scheduled to release its results on 27 August 2020.
Ahead of the release, I thought I would look to see what the market is expecting from the company.
What should you expect from the Woolworths full year result?
According to a note out of Goldman Sachs, it is expecting the conglomerate to record solid growth in sales in FY 2020.
For the 12 months ended 30 June 2020, the broker expects Woolworths to record a 5.9% year on year increase in sales to $63.52 billion.
A key driver of this growth is expected to be a very strong increase in Australian Food sales during the year. Its analysts expect the segment to report comparable store sales growth of 7.2%, bringing its total sales to $41,878.5 million.
Goldman believes that its Big W, NZ Supermarkets, and Endeavour Drinks businesses will be supporting this growth. It is forecasting sales growth of 8.9% for NZ Supermarkets, 8.6% for Endeavour Drinks, and 7.2% for Big W.
While these businesses are benefiting from the pandemic, its Hotels business has been impacted greatly due to closures. As a result, the broker is forecasting a 21.5% decline in Hotels sales to $1,311.6 million in FY 2020.
What about its earnings?
Unlike rival Coles Group Ltd (ASX: COL), Goldman Sachs isn’t expecting Woolworths’ profits to grow in FY 2020. This is due partly to additional COVID related costs and also its new enterprise agreement.
The broker has pencilled in a 2.6% increase in Australian Food segment earnings before interest and tax (EBIT) to $1,905.6 million on a pre-AASB16 basis. On a post-AASB16 basis, Australian Food EBIT is expected to be $2,198.4 million.
And although solid EBIT growth is also expected from Endeavour Drinks and NZ Supermarkets, and the Big W brand is expected to become profitable at long last, a sharp decline in Hotels EBIT is expected to weigh on its profit result.
Goldman expects Woolworths’ underlying net profit after tax to be at $1,572.7 million, or $1,699 million on a pre-AASB16 basis. This represents a 3.1% year on year decline.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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