Woolworths posts strong sales figures despite disappointing NZ results

Posted by Daniel Palmer on 28th January 2009

Woolworths, Australia’s largest supermarket operator, has reported first-half sales growth of 8.8 per cent to $26.1b, driven by solid results from their Australian supermarket division and Big W.

The retailer, which now operates 792 supermarkets in Australia, reported Australian Food and Liquor sales for the half year had risen 9% to $16.9 billion, with sales for the second quarter of $8.6 billion – an increase of 9.8% over last year. Comparable store sales in the division for the second quarter increased 7.1%, above the first quarter’s 6% rise. Inflation in the second quarter increased to 4.8% from 3.2% in quarter one and reflects the disinflation in produce ceasing, the company added.

“Key strategic initiatives … including the accelerated rollout of our 2010c format, our Everyday Rewards Program and continued price re-investment have all contributed to this sales result,” a Woolworths statement advised. “These initiatives continue to be well received by our customers.”

The transition to Greg Foran as Director of Food, Liquor and Petrol during the quarter “has been seamless,” the company reported, after long-serving employee Naum Onikul left last year.

In New Zealand, their operations continued to be affected by a weakened economy and a softening New Zealand dollar. Woolworths’ supermarkets in the region achieved a sales result of $2.13 billion for the half year, an increase of 3.5% in NZD, paling in comparison to their Australian figures. With the New Zealand dollar weighed down compared to the Aussie, sales in the region actually fell 1.2% compared to this time last year in AUD terms.

Woolworths Chief Executive Officer and Managing Director, Michael Luscombe, said that the strong results were achieved through continued business investment despite the economic headwinds. “Woolworths has continued to reinvest in all its businesses to improve our stores, create jobs, add services, deliver value, and create an even better shopping experience for our customers,” he suggested. “This is a pleasing result in a more challenging economic environment and I am confident that we are well positioned to meet future challenges.”

Mr Luscombe noted in a teleconference that, despite some reports to the contrary, the stimulus package did assist retail sales. “There is no doubt that the government fiscal stimulus was a positive for us,” he said. “I’ve read commentary elsewhere that it didn’t do much. But we saw it come in for the working families… and we saw it in the shops and shopping centres where they would be in predominance.”

With sales for the first three weeks of the third quarter also remaining robust, perhaps it is little wonder that Woolworths doesn’t believe in recessions.