Woolworths has reported a lower first-half profit due to coronavirus-related costs while managing director Brad Banducci warns it is inevitable food prices will rise.
The retail giant, which includes Big W, supermarkets and a reduced stake in drinks business Endeavour, on Wednesday declared net profit after tax down six per cent to $795 million for the 27 weeks ended January 2.
This measure is based on continuing operations and does not include the $6.3 billion gain from selling part of its Endeavour stake.
Group sales were up eight per cent, compared to the previous corresponding reporting period, but Woolworths had to spend more protecting staff and customers from the COVID-19 wave, which caused lengthy lockdowns on the east coast. This included regularly testing workers for the virus.
Australian food sales remain strong at the start of calendar 2022 and were up five per cent for the first seven weeks. This was despite shortages of some foods and many employees being sick with the virus.
Mr Banducci said inflation had forced prices up about two to three per cent.
"We expect inflationary pressures to continue to intensify due to industry-wide cost increases," he said.
"It is inevitable prices will increase."
COVID-19-related costs would remain elevated in the third-quarter, he said, however he expected these to moderate over the second-half of the financial year.
Big W was the only division to report falling sales.
Sales dropped nine per cent in the first-half after many stores only traded online due to lockdowns.
Mr Banducci said a second-half profit was expected for BIG W but conditions would be challenging.
Woolworths also owns retail supplier PFD Food Services, purchased last year, and a data analytics business called Quantium.
Investors will receive a fully franked interim dividend of 39 cents per share. This is lower than the 53 cents per share paid a year ago.
Chairman Gordon Cairns said the lower interim payout was due to the reduced stake in Endeavour.
Company shares on the ASX were up almost one per cent to $35.53 at 1427 AEDT.
