Woolworths reports stronger growth in first quarter despite economic concerns
Woolworths, Australia’s largest supermarket operator, has today announced record first quarter sales of $12.8 billion, representing a 9.6% increase on last year.
The growth of just under ten per cent surpassed the expectations of analysts ABN Amro, who anticipated growth of around 8.4%.
Woolworths’ Chief Executive Officer, Michael Luscombe, believes the results were very positive for the company as they seek to deal with changing economic conditions. “This is a good start to the financial year. Particularly pleasing is the continued momentum in our Australian operations, with an overall improvement in comparable sales growth.
The significant re-investment in each of our businesses has continued to deliver positive results,” he advised.
Woolworths’ Australian ‘Food and Liquor’ division registered an 8.3% incline in sales, with the roll-out of their new 2010c store format, Everyday Rewards Program and ‘price re-investment’ credited with the strong result.
Their New Zealand Supermarkets division struggled in comparison, with the deteriorating economic conditions and refurbishment activity blamed for the less than spectacular outcome. New Zealand Supermarkets managed to book an increase of 3.1% in NZD terms. This represented a 5.6% decline in AUD terms, however, and was below the inflation rate (5.7%).
Petrol dollar sales for the quarter, including Woolworths/Caltex Alliance sites, increased 30.4%, with average fuel sell prices well above the prior year. Petrol comparable sales increased by 26.5% (Q4 2008: 20.4%), with comparable volumes having increased 1.7% for the quarter. The growth has been assisted by the strong interest in the Everyday Rewards Program, which now has 2.6 million registered cards.
Their BIG W, hotels and consumer electronics sectors also banked sales growth of 10% or greater, although comparative sales declined in the hotels division.
Mr Luscombe maintained their full year sales forecast, with sales growth expected to be in high single figures. “We are mindful that discretionary spending continues to be influenced by macroeconomic factors and will be influenced by the recent events in global financial markets. Subject to the uncertainty these factors create, we maintain our sales outlook for the full year where we expect sales from continuing operations to grow in the upper single digits,” he said.
Mr Luscombe two weeks ago discussed Woolworths’ lack of belief in recessions, as the country’s largest supermarket chain seeks to enhance their sales momentum while their largest competitor, Coles, focuses on a five-year turnaround.
“At Woolworths, we don’t believe in recession and we never have,” he said at the Queensland University of Technology Business Leaders’ Forum in Brisbane earlier this month. “Instead of thinking how do we stop spending, how do we stop hiring, how do we shed people? We are actually thinking and have a plan. (We are thinking) how do we push this business as hard as we can over the next 18 months, how can we ramp up the number of stores we are refurbishing, how do we ramp up our new store openings?”