Supermarkets continue to spark robust growth at Woolworths

Posted by Daniel Palmer on 17th April 2009

Woolworths has reported third quarter sales growth of 6.5 per cent, surpassing analyst expectations.

Woolworths’ Chief Executive Officer, Michael Luscombe, suggested the $12.3 billion sales result highlighted a resistance to the downturn.

“We are pleased to report another strong overall sales result,” he said. “Woolworths continues to reinvest in all its businesses to improve our stores, create jobs, add services, deliver value, and create an even better experience for our customers. This result reflects the continued positive response from our customers to these reinvestment strategies.”

Sales growth slowed compared to the first two quarters of the 08/09 financial year, largely due to petrol price declines. Their Australian food and liquor division, however, was particularly resilient, with sales up 10.0%. When accounting for the later Easter – which fell in the fourth quarter this year- sales escalated by 10.8%.

Comparable store sales in Food and Liquor also strengthened, recording an increase of 7.9% in the third quarter* (8.8% Easter adjusted) – notably above the 7.1% recorded in the second quarter.

Greg Foran, Director of Food, Liquor and Petrol, believes extensive investment in their supermarkets, which led to 18 refurbishments for the quarter, was a key to the ongoing strength of the business.

“The strong momentum that has continued in the third quarter is a direct result of a number of key strategic initiatives focused on our customers, including the accelerated rollout of our 2010c format, our Everyday rewards program and continued price reinvestment,” he stated. “Our accelerated refurbishment program is continuing to deliver strong returns through improvements in both sales and gross margin. We are on track to have approximately 40% of our supermarket network in our new refreshed format by the end of this financial year.”

Once again their New Zealand supermarkets lagged their Australian counterparts, with a mere 3.2% Easter adjusted sales growth despite food inflation of approximately 6.0%.

Woolworths expects sales growth to remain in the upper single digits for the rest of the year despite a troubled economy. “We are mindful that discretionary spending continues to be influenced by macroeconomic factors and by the recent events in global financial markets,” a Woolworths statement advised. “Factors such as inflation, fluctuating petrol prices, interest rates, rising unemployment and consumer confidence levels are very difficult to predict in the current environment.”

“Subject to the uncertainty regarding these factors, we expect sales from continuing operations to grow in the upper single digits (excluding Petrol Sales) on a 52 week basis.”

The news was well received by the market, with Woolworths shares soaring over 4 per cent to $26.64 in morning trade.

* Inflation for the quarter fell to approximately 4.4%, from the 4.8% experienced in the second quarter.