Woolworths sees jump in sales

Last updated 14:12 06/02/2014

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Rising grocery and produce prices and a successful trading card promotion featuring 'Aussie Animals" helped Woolworths lift group sales 5.9 per cent to A$16.2 billion ($17.6 billion) in the latest quarter.

That was almost double the rate of growth in the first quarter of the financial year.

Sales growth in Woolworths's earnings engine-room, the Australian food and liquor business, rose 5.1 per cent in the 13 weeks ended January 5. Same-store sales climbed 3.4 per cent, buoyed by the roll out of new stores. The same-store sales growth exceeded analysts' forecasts of about 2.75 per cent and compared with 2.5 per cent first-quarter growth.

Its shares rose in morning trading and were up 1.3 per cent at A$34.37 at 11.15am, Sydney time.

New stores and last year's acquisition of online and catalogue retailer EziBuy also buoyed revenue at BIG W, offsetting weak same-store sales. BIG W's total sales rose 3.3 per cent to A$1.4 million, but same-store sales fell 1.7 per cent, with price deflation countering higher sales volumes.

Analysts had expected same-store sales to fall as much as 2.7 per cent.

In petrol retailing, higher fuel prices helped offset lower petrol volumes, with total sales rising 3.3 per cent to A$1.7b and same-store sales up 2.5 per cent.

In New Zealand supermarkets, total sales rose 16.6 per cent in Australian dollar terms and 3.4 per cent in NZ dollars, with same-store sales up 2.1 per cent.

Sales in the home improvement business climbed 22 per cent to A$405m, falling short of analysts' forecasts of about 30 per cent. Masters sales rose 46.5 per cent to A$211m, buoyed by seven new stores, but sales at the Danks wholesaling business, which has been losing members to Mitre 10, rose just 3.2 per cent.

Online sales rose more than 40 per cent in the second quarter as customers took advantage of increased flexibility in ways to shop. Onlines sale now exceed A$1b on an annual basis, ahead of target.

The solid second-quarter sales results lifted Woolworths's half-year group sales from continuing operations 6 per cent to A$31.8b, which was in line with forecasts.

Chief executive Grant O'Brien said the strong first-half sales result reflected progress against the retailer's four-point strategic plan, which is aimed at restoring profit growth to about 10 per cent over time.

"The first priority, and the central theme of our focus, has been to 'extend our leadership in Food and Liquor'. The improvement in the growth rates for our Food and Liquor business demonstrates the transformation that is underway," O'Brien said in a statement.

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"Successful Christmas trading in Australian food and liquor helped to deliver sales growth of 4.8 per cent for the half year as well as increases in market share, customer numbers, basket size and items sold," he said. Woolworths is now serving 21 million customers a week, 3.9 per cent more than the previous year.

O'Brien said Woolworths supermarkets delivered savings of more than A$400m to customers, predominantly through the 'More Savings Every Day' promotion. However, standard shelf prices (excluding promotions) rose 2.1 per cent in the second quarter after being flat in the first quarter, reflecting higher prices for tobacco and fresh produce.

Despite the improved momentum in the second quarter, O'Brien made no changes to the company's guidance for 4 to 7 per cent net profit growth for the full year.

"Our four strategic priorities are shaping the transformation and performance of our business and we are focused on continuing the momentum we have generated into the second half of the financial year," he said.

According to consensus forecasts, analysts are forecasting 5.9 per cent net profit growth to A$2.5b for the year.

- Sydney Morning Herald

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