British sweets-to-DVDs retailer Woolworths reported a 74% drop in annual pretax profit on Wednesday, saying the new financial year began positively but the retail environment would remain challenging.
"Last year was difficult for the Woolworths Group, particularly for the retail business," Chief Executive Trevor Bish-Jones said in a statement.
Woolworths said its profit before tax came in at 16.0 million pounds ($31.4 million) for the year to Feb. 3, well down from its 61.5 million pound profit on the previous year.
It was also slightly below analysts' expectations, already factored down after a profit warning in the lead-up to Christmas.
Pretax profit adjusted for rental uplifts and amortisation was down to 21.8 million pounds, about one-third of the 57.7 million pounds in the previous year.
"That number is probably a bit less than we were hoping for for the year just finished," said analyst Mark Charnock at Investec Securities.
Although its stores are struggling against cut-price competition from supermarkets, the company said EUK, its entertainment wholesale subsidiary, made "extremely good progress."
Sales in its entertainment wholesale and publishing business were up 29.7%, while like-for-like sales in retail fell 6.6% on the year.
"The retail environment is likely to remain challenging in the current year," Bish-Jones said.
"The first seven weeks of the new financial year have begun postively, but it is early days and we will continue to manage the business tightly."
Overall, Woolworths said gross margin increased by 105 basis points.