Woolworths predicts “subdued” trading for 2012

Posted by AFN Staff Writers on 25th August 2011

Australia’s largest supermarket chain, Woolworths Limited, today reported an increase in Net Profits After Tax (NPAT) of 5.1% for the year ending 26 June 2011. Woolworths’ outgoing CEO Michael Luscombe anticipated trading over the next year to be “subdued”, due to falling consumer confidence.

Commenting on the company’s full-year results, published today, Woolworths CEO Michael Luscombe claimed the company’s profit increase to be a “sound result” given the “particularly challenging” retail environment in Australia over the past year.

Mr Luscombe said, “A net profit increase of 5.1% to A$2.124 billion is a sound result given prevailing macro-economic and market challenges. In Australia, consumer spending stalled, individual savings levels increased, household utility costs rose sharply and interest rates increased in the first half of the financial year.

“Consumer spending was further weakened by the unseasonably poor weather in Australia during the crucial Christmas trading period and the devastating natural disasters in Queensland and Christchurch, which incurred A$38 million in direct additional business costs.

Woolworths Limited Chairman, James Strong added, “The Board is pleased to announce a 6.1% increase in Dividends per Share to 122 cents from 115 cents. This increase exceeds earnings growth.

Falling consumer confidence

Mr Luscombe said, “Consumer confidence has fallen. This was seen particularly in the second half of the last financial year. Therefore, it remains very difficult to predict accurately the outlook for 2012. However, we anticipate trading over the year will be subdued.”

Woolworths announced in May 2011 the creation of a home hardware chain using the brand ‘Masters’.

Mr Luscombe said “As Woolworths plans for future growth, through expansion into the circa A$40 billion home improvement market, we anticipate start-up costs for Masters of up to $100 million, which will impact our overall earnings in 2012. The amount of these start-up costs is dependent upon a range of factors, particularly the pace of our new store roll out. We expect a year of further earnings growth in 2012 with NPAT expected to grow in the range of 2% – 6%.”

Michael Luscombe is leaving his Chief Executive Office role to be replaced by Grant O’Brien, who will assume the new position officially on 1 October 2011.