Amid the mining and petroleum quarterly reports, Woolworths, Australia’s largest supermarket chain, revealed a fairly dull first quarter effort that failed to impress the market.
Same store sales rose a sedate 2%, which was under forecasts.
The retailer warned continuing tight consumer spending would make for a challenging year.
On a headline basis, Woolworths said total first-quarter sales rose 4.1% to $13.9 billion.
The discount department chain Big W saw sales fall 2.7% in the quarter, hit by "significant" price deflation as the fast rising value of the Australian dollar cut margins and sales returns.
But that was better than the 9.3% drop in the fourth quarter, which was due to the previous fourth quarter of 2009 being boosted by the impact of the stimulus spending of the federal government.
But rising interest rates and talk of slower growth did impact consumers, as did the lack of government stimulus in 2010.
At Dick Smith, which competes mainly with JB Hi-Fi and Harvey Norman, sales in Australia rose 0.9%.
But same store sales were up a sharper 3.3% in the quarter.
The difference between the headline and same store rates tells us how much damage the dollar has done to selling prices.
In fact the division had a strong quarter, comparatively speaking.
JB Hi-Fi told its AGM that while sales were up 12% in the first quarter that was still 5% under target.
All consumer electronics retailers and wholesalers have reported intense competition and deflation for key products such as flat-screen TVs because of the impact of slow demand and the rapid rise in the value of the dollar.
Retailers and wholesalers can’t shift their product fast enough to adjust inventory values and selling prices to the escalation in the key $A value against the weakening $US.
CEO Michael Luscombe said in yesterday’s statement, "This sales result is a solid start to the financial year which continues to hold underlying challenges for the retail sector such as tighter consumer spending and the deflationary impacts of the stronger Australian dollar".
"All things being equal, I think we will see a reasonably good Christmas," he told analysts’ at a later briefing.
He added the one caveat was any further increases in the Australian dollar, which has led to steep price deflation in some consumer goods (electrical and clothing) in the first fiscal quarter at Woolworths’ Big W and Dick Smith stores.
Woolies shares fell, rebounded, then fell again, then rose, then fell in something of a roller coaster day for the securities.
They ended off 9c at $28.88.
Woolworths’ core Australian food and liquor division posted same-store sales growth of 2% in the quarter, below market forecasts of 2.3% rise.
Headline sales rose 3.2% to $9.29 billion from $9 billion in the first half of 2009-10.
Main rival Coles reports its first quarter sales performance later today when its owner, Wesfarmers, issued its sales report (which will also cover its coal interests in Queensland, NSW and WA).
