CEO boasts Woolworths has taken Masters and Big W losses in stride but market skeptics remain
Retail giant Woolworths has reported net profits of $2.45 billion for the year to June 30 2014, up from $2.26 billion a year earlier. The profit gains of 8.5 per cent came despite losses of $169 million from Masters hardware chain and weak earnings at Big W down nearly 19 per cent.
Strong growth in food and liquor
With profits primarily reflecting improved sales in its food and liquor businesses, Woolworths chief executive Grant O’Brien expects continuing growth of between four and seven per cent in the 2014/2015 financial year. “What I’m most thrilled about with today’s result is that it is showing improved momentum across our food and liquor business,” Grant O’Brien said.
Mr O’Brien attributed most growth to aggressive promotional campaigns luring more customers to Woolworths supermarket aisles and the Woolworths website. He said net profits had come from a lift in sales and earnings from the core supermarket division, despite a slide primarily in grocery prices. “We have increased comparable sales and EBIT growth in Australian Food and Liquor over the past three years, gaining further momentum in FY14,” he said.
Mr O’Brien said that like the company’s food retailing businesses, the liquor retailing businesses, which include Dan Murphy’s, BWS and online seller The Wine Quarter all recorded strong growth. “In a highly competitive market with ongoing consumer uncertainty, we have increased market share while also delivering value to customers who have saved more than $750 million from key promotional campaigns throughout the year and benefited from deflation in average prices of 3.1 per cent for the year” Mr O’Brien said.
Retail losses for Masters and Big W
Australian Food News last month reported on the disappointing financial results for Masters. Despite an optimistic outlook earlier in the year, retail losses for Masters ate into profit margins for the Supermarket giant.
Woolworths preparing for future growth
Though reporting similar sales results, the strategies adopted by Coles and Woolworths have been different. In a previous article in Australian Food News, Woolworths profit strategy has focused on the acquisition and opening of stores where Coles has focused on profit through efficiencies per square metre of existing stores. Woolworths has invested more capital to expand its number of stores where the payoff will be longer term. This saw Woolworths open 19 new supermarket stores in 2013, bringing its current total number of stores to 872. This can be contrasted with Coles, which at 741 supermarket stores is only now starting to plan for future expansion in the number of stores it owns.
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