Woolworths banks $1.6b in profit

Posted by James Ferre on 26th August 2008

Woolworths, Australia’s largest supermarket operator, has announced a 26% increase in net profit, with their long-term commitment to improving logistics systems and distribution networks credited as key reasons for the success.

Woolworths Limited Managing Director and CEO, Michael Luscombe outlined his delight with the results. “Today we are pleased to report a net profit increase of 25.7% to $1,626.8m,” he said. “This has been a rewarding year for our team with our business performing well overall. The delivery of quality results on a consistent basis reflects the ongoing implementation of our strategy.”

“We have continued to refine our brand proposition with significant investment in price, merchandise range and quality during the year. This investment continues to deliver gains in market share,” Mr Luscombe added.

Commenting on the result, the Chairman of Woolworths Limited, James Strong indicated that their supply chain was a major reason behind their recent growth. “Woolworths has developed significant intellectual property reflected in our world class supply chain capability and retail offer,” he claimed. “Our people have great depth of retail knowledge and experience, which enables them to define and execute strategies successfully.”

The supermarket giant continued to update their Big W and Woolworths outlets with environmentally friendly initiatives and self-service checkouts among noticeable changes. “The new formats are a result of better understanding our customer needs and adapting concepts we obtained from looking at overseas retailers to the Australian market,” the company advised in a statement. “This is a continuous process at Woolworths – the new 2010c Supermarket and BIG W represents our current format, however this will continually evolve and improve. The next stage is the launch of new brand logo for the Australian Supermarkets – another step in reinvigorating our offer to customers.”

The company suggested the new store formats had been warmly received by consumers and advise that they now have 180 supermarkets in their “2010c” format.

Woolworths also reported that the new supply chain platform continued to deliver financial benefits, with distribution centres achieving or exceeding expectations, while the launch of the “Everyday Rewards” program was met with greater interest than expected – 3.8 million cards are now on issue. The program replaced the petrol saver docket with a card-based system.

Some analysts have questioned whether Woolworths will be able to maintain growth rates as their grocery market share is already so high and creeping acquisitions are now under a greater spotlight. Woolworths, however, believes that the future is very healthy and indicate entry to new categories will be one method of attaining strong growth rates. An example of this is their imminent introduction of a credit card in conjunction with HSBC and MasterCard.

Acquisitions and partnerships are also on the agenda in Australia and New Zealand and the company “continues to look at opportunities outside Australia”.