Woolworths’ strong second quarter and first half sales gains were well anticipated by investors this week, the shares climbing from just under $23.10 at the start to a high yesterday of $23.94 after they were released.
That $23.94 was within sight of the all time high of $24.20 reached about two months ago and represented a rise on the day of 30c, but late selling pressure in a weaker market saw that gain cut to just 11c and the shares finished at $23.75.
Still, that was a solid gain of almost three per cent in three days with strong rises noticed on both Monday and Tuesday ahead of the release.
The buying was inspired, Woolies posting a 15.9 per cent rise in top line sales in the first half thanks to solid performances in all divisions.
The country’s leading retailer said sales totalled $22.09 billion, up from $19.06 billion in the first half of 2005 and the company repeated previous guidance for 2006-07 sales to grow by between eight and 12 per cent.
That will happen in this quarter as the boost from the New Zealand acquisition disappears from the comparison: the NZ acquisition was fully incorporated in Woolies accounts in the second and third quarters of 2006.
The company’s troubled Big W discount chain seems to have improved with real growth in sales returning for the first time in a number of months in the final quarter, helped by falling petrol prices.
On a topline basis, supermarkets reported sales growth of 16.7 per cent to $18.84 billion for the 27 weeks to December 31.
And sales in the heart of that business, its Australian food and liquor, rose nine per cent to $14.34 billion on a topline basis and by 6.4 per cent on a comparable store basis. That was up from a comparable store basis growth of 4.9 per cent in the first quarter. Retail price inflation was four per cent and easing, so actual volumes improved in the second quarter compared to the first.
Big W grew sales on a topline basis by 7.7 per cent to $1.934 billion while they edged up 0.6 per cent on a comparable basis (worse than inflation) after a 1.1 per cent rise in the December quarter.
The New Zealand Progressive supermarkets also did well with sales growing 155.3 per cent to $1.99 billion: that’s because they were not fully incorporated until this quarter. That comparison will come back to a more realistic figure. A better guide can be seen from the 1.9 per cent growth in same store or comparable sales growth, with a rise of 3.8 per cent in the December quarter.
Woolworths, which has an alliance with Caltex, also benefited from petrol sales which increased 13.8 per cent to $2.5 billion on a topline basis and 7.8 per cent on a same store basis. Woolies sells both through its own sites and through the JV with Caltex.
On a quarterly basis, Woolworth’s total second quarter sales were up 11.5 per cent to $11.35 billion compared to the same period last year.
Woolies will reveal first half earnings on February 27.
Buried in the Woolies release is an interesting story about petrol sales.
As reported above Woolies petrol sales, through its own canopies and through the JV with Caltex, rose 13.8% to $2.5 billion in the half year.
Comparable petrol sales increased by 7.8% with a 4.5% rise in the December quarter.
Comparable petrol volumes rose 3.6% in the half, 6.8% in the December quarter.
The December quarter saw oil and petrol prices fall sharply and then rebound a touch before the big slide at the start of January.
Woolies and Coles ran multiple price discount schemes in December in the run up to Christmas (and also again last month). These were four, six and 10c a litre off the price for spending certain amounts of money in supermarkets and some liquor outlets.
The cost of these voucher schemes is tax deductible for the retailers because they are classed as marketing costs for the supermarkets.
What these figures do show that as petrol fell in price in the December quarter, sales volumes rose faster than the value of sales (the top line dollar value of sales was 4.5% in the quarter but actual volumes sold rose 6.8% on a comparable basis).
So it looks as though the discount schemes helped drive volumes.
Woolies opened five new canopies taking its total number of outlets to 495, including 132 with Caltex.