Woolworths (ASX:WOW) share price gains on 23% profit surge

The Woolworths Group Ltd (ASX: WOW) share price is moving higher in early trade. This comes after the supermarket giant released its impressive FY21 full-year result this morning.

At the time of writing, shares in the $52 billion company are trading 1.25% higher to $41.33. Based on the latest result, Woolworths shares are now trading on a trailing price-to-earnings (P/E) ratio of ~26.4 times.

What’s happening with the Woolworths share price?

It is euphoria for the Woolworths share price and its shareholders following today’s result. A strong operational environment over the past 12 months has put the retail operator in an attractive position.

According to its results, the company experienced a 5.7% uptick in group sales to $67,278 million in FY21. However, the magic really occurs on the bottom line of Woolworths’ full-year financial statement. In particular, group net profit after tax surged 22.9% to $1,972 million.

For the most part, this spurt of earnings growth from the blue-chip was driven by improved trading conditions. In addition to this, the company benefitted from its demerger of Endeavour Group Ltd (ASX: EDV).

Consequently, the company has been left with a cash cow that it plans to, in part, give back to shareholders — likely lifting the Woolworths share price today.

In sharing the success, the supermarket giant declared a final dividend of 55 cents per share and a hefty $2 billion share buyback.

Management commentary

Commenting on the result, Woolworths CEO Brad Banducci said:

The Delta variant of COVID has seen the operating environment change rapidly in the last three months. We are working hard to protect our team and continuing to provide food and everyday needs for our customers and the communities which we serve. It has become clear that vaccination is key to the safety of our team and the easing of restrictions, and we are committed to supporting vaccination efforts across the broader community.

I want to express my deep gratitude to our team as they continue to demonstrate care for each other and our customers, and acknowledge the Government and industry for their support as we work through these challenging times together.

Additionally, the buyback announced will be an off-market one. This return of capital to shareholders will also provide $840 million of franking credits to investors.

Where to from here?

Finally, Woolworths’ management refrained from providing guidance for FY22. Mr Banducci noted that the delta variant will continue to challenge the business and community.

However, the CEO stated, “I am confident that we have the right foundations in place to continue to deliver value for our customers, teams, communities, and shareholders.”

Although the lack of guidance is typically negative, it hasn’t depressed the Woolworths share price today.

For investors hoping to snag the upcoming dividend, the ex-dividend date will be on Thursday 2 September.

The post Woolworths (ASX:WOW) share price gains on 23% profit surge appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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