Woolworths reports 13 per cent surge in profit

Posted by Daniel Palmer on 27th August 2009

Australia’s largest supermarket chain has today announced a record profit of $1.835 billion, up 12.8 per cent on last year.

The company, which announced a move into the hardware sector this week, put the strong result down to continued investment in their businesses.

“Today we are pleased to report a net profit increase of 12.8% to $1,835.7m,” Woolworths Limited Managing Director and CEO, Michael Luscombe, said. “Our investment has improved stores, created jobs, added services, delivered value, created an even better experience for customers and enhanced shareholder value.”

“The successful implementation of these strategies continues to pay strong dividends and builds a solid base to sustain profitable growth into the future.”

As reported in their fourth quarter sales result last month, the supermarket chain saw sales rise 9.6 per cent for the full-year in their Australian food and liquor division.

Throughout the year they upgraded their supermarket stores to their 2010c format, with 40 per cent now in this format. Woolworths said the 2010c store continued to evolve based on customer feedback and would be altered on the back of further shifts in consumer behaviour.

Private label was seen as a driver of profit growth, thanks to a ‘trading down’ amongst consumers and greater development of their range.

“The development of our private label range and controlled brands continues, with all our ranges gaining strong customer acceptance,” Woolworths suggested in a statement. “The growth in private label products exceeds our overall sales growth, which is a strong endorsement of their quality and value for money and also demonstrates good levels of repeat purchase. Sales of Homebrand have been particularly pleasing as customers opt for more budget-friendly products.”

Their private label range now includes Homebrand, Select, Freefrom, Naytura and Organics. The Macro brand, which they acquired in May, would be progressively rolled out into their supermarkets throughout the 2010 FY.

James Strong, Chairman of Woolworths Limited, concluded that the company was in a sound position to report profit growth of between eight and 11 per cent in the coming year.

“The year has seen significant global economic challenges that will continue in the near term. Woolworths is well positioned going forward and will continue to invest to develop both core and new business opportunities in order to enhance shareholder value,” he said.