Woolworths records flat third quarter results in food and liquor

Posted by AFN Staff Writers on 23rd April 2012

Woolworths Limited has announced its third quarter sales of AU$13.7 billion, an increase of 3.9 per cent on the previous year, despite the company’s food and liquor sales remaining the same as they were this time last year.

Woolworths Limited, one of Australia’s two major supermarket groups (the other being Coles), has divisions for its supermarkets, takeaway liquor chain and divisions in general merchandise, consumer electronics, hotels, and home improvement. The company’s third quarter results covered the 13 weeks to 1 April 2012.

Woolworths reported that its Australian food and liquor sales for the third quarter were AU$9.4 billion, an increase of AU$0.3 billion (or 2.9 per cent) on the previous year. However, excluding the financial impacts of new store openings, the company’s food and liquor sales were the same as the 3.3 per cent growth of the third quarter last year.

The figures are likely to be disappointing to Woolworth’s shareholders. The figures are probably an accurate reflection of the increased competition being faced by Woolworths from the improving profitability of its competitor Coles.

Woolworths CEO “cautious” about sales outlook

Commenting on the results, Woolworths CEO Grant O’Brien cited a continuing tight consumer market and accelerating deflation as major influences on the third quarter results.

Mr O’Brien said, “We continue to remain cautious about the sales outlook for the fourth quarter, particularly given consumer and business uncertainty about the impact of the carbon tax and interest rates.”

Mr O’Brien referred to sales growth comparisons with the prior year given that the prior year’s sales had been accelerated by of the Queensland floods and Cyclone Yasi. Additional sales in the prior year had occurred as a result of panic buying and the temporary closure of competitor stores within some affected areas. The loss of fruit and vegetable crops following the Queensland floods and cyclone Yasi in early 2011 had seen significant inflation in the prior year, Mr O’Brien said. In effect, this would have skewed any comparison of the latest 2012 figures.

Woolworths claims its market share is increasing

Woolworths opened six Australian Supermarkets during the quarter, bringing the total to 867. The company also opened two Dan Murphy’s during the quarter, taking the total to 156. Woolworths said it plans to open an additional eight Australian supermarkets and seven Dan Murphy’s in the final quarter of the 2012 financial year.

Woolworths’ Managing Director of Australian Supermarkets and Petrol, Tjeerd Jegen said that, despite the flat results, the company was pleased to increase market share, customer numbers and items sold during the quarter.

“Fresh food continued positive sales momentum, led by Bakery, Deli, Meat and Seafood and we continue to see strong results from new products such as our Meat Standards Australia (MSA) accredited beef,” Mr Jegen said.

“Sales continue to be impacted by significant deflation, particularly in Produce, Seafood, Bakery and Deli. Produce deflation was close to 20% for the quarter with many key lines significantly impacted, for example, bananas, pumpkins, watermelons and tomatoes. We also continued to invest in price, particularly in the Grocery, General Merchandise and Liquor categories.”