Leading retailer, Woolworths (WOW) is on track for another record profit of more than $2.5 billion this year after reporting solid second quarter and half year sales figures yesterday.
The company’s shares rose 2.1% to $34.635 as investors gave the solid quarterly result a tick.
Top line sales rose 5.9% in the three months to December, almost double the gain in the September quarter, as higher fruit, vegetable and tobacco prices kicked in, with the weaker dollar playing a part.
In the Australian food and liquor business, Woolworths’ earnings engine-room, sales rose 5.1% in the quarter, with same-store sales growth of 3.4%, both of which were much higher than market forecasts of around 2.75% and 2.5% respectively.
For the half year, Australian Food and Liquor sales were $21.5 billion, an increase of 4.8% on the previous year. Sales for the second quarter were $10.9 billion, an increase of over $0.5 billion or 5.1% on the previous year.
"Comparable store sales increased 3.0% for the half year and 3.4% for the second quarter with increased momentum at the end of the half and a continuing trend of improving quarterly comparable sales growth," the company said.
WOW 1Y – Woolies sales improve as well and record profit looms
At BIGW, new stores and last year’s acquisition of online and catalogue retailer EziBuy also buoyed revenues, offsetting sluggish sales at existing outlets.
BIG W’s total sales rose 3.3%, but same-store sales fell 1.7%, with price deflation countering higher sales volumes. Some analysts had expected same-store sales to fall as much as 2.7%.
"Sales for the half year were $2.5 billion, an increase of 0.2% on the previous year. Sales for the second quarter were $1.4 billion, an increase of 3.3% on the previous year. Comparable store sales decreased 2.3% for the half year and decreased 1.7% for the second quarter," the company said.
In petrol retailing, higher fuel prices helped offset lower petrol volumes, with total sales rising 3.3% to $1.7 billion and same-store sales up 2.5%.
"Petrol volumes increased 0.6% for the half year, however decreased 2.4% for the second quarter. Comparable volumes decreased 0.6% for the half year and decreased 3.2% for the second quarter," Woolies said.
In New Zealand supermarkets, total sales rose 16.6% in Australia dollar terms and 3.4% in NZ dollars, with same-store sales up 2.1%, also in Kiwi dollar terms.
"New Zealand Supermarkets’ sales for the half year were NZ$3.0 billion, an increase of 2.6% on the previous year (15.2% increase in AUD). Sales for the second quarter were NZ$1.5 billion, an increase of 3.4% on the previous year (16.6% increase in AUD)," according to the company.
Comparable sales for the half year increased 0.7% and for the second quarter increased 2.1%. Woolies benefitted from the fall in the value of the Aussie dollar against its Kiwi counterpart. That will show up in the first half profit announcement at the end of this month.
In the hotels business sales for the half year were $788 million, up 3.8% on the previous year. Sales for the second quarter were $385 million, a rise of 1.3% on the previous year.
Comparable sales for the half year increased 2.1% and for the second quarter increased 0.5%.
Sales in the hardware and home improvement business jumped 22% to $405 million. Sales in the evolving Masters rose 46.5% to $211 million, buoyed by seven new stores, but at the Danks wholesaling business, sales growth was a slower 3.2%. Masters sales for the half year were $393 million, up 49.4% on the previous year.
Online sales rose more than 40% and now exceed those coming from the hotels.
Woolies says that its online sale now exceed $1 billion on an annual basis, which is ahead of target.
But looked at as a percentage of revenue, which will reach $60 billion this financial year, the share is still very small. But Woolies is getting some traction.
The solid December quarter sales boosted Woolworths’s half-year group sales from continuing operations 6% to a total of $31.8 billion, which was in line with most forecasts.
CEO Grant O’Brien said in yesterday’s statement that the strong first-half sales result reflected progress against the retailer’s four-point strategic plan, which is aimed at restoring profit growth to about 10% over time.
“The first priority, and the central theme of our focus, has been to ‘extend our leadership in Food and Liquor’. The improvement in the growth rates for our Food and Liquor business demonstrates the transformation that is underway,” Mr O’Brien said in a statement.
“Successful Christmas trading in Australian food and liquor helped to deliver sales growth of 4.8 per cent for the half year as well as increases in market share, customer numbers, basket size and items sold,” he said. Woolworths is now serving 21 million customers a week, 3.9 per cent more than the previous year."
Mr O’Brien said Woolies is confident of delivering 4% to 7% net profit growth this year. That would see profit exceed $2.5 billion, which is what most analysts have forecast.
“We’re pleased with where the food and liquor business is trading – we are making sure we continue that momentum for the full year,” Mr O’Brien said on Thursday after releasing better-than-expected second-quarter sales results.
“If the sales momentum we’ve seen was not going to deliver the (profit) guidance we’ve given, we’d be making an announcement… We’re not, which means we’re generally happy with the sales momentum in the business and that will meet our sales targets moving forward,” he said.
WOW First Half Year Sales Results – Financial Year 2014 27 weeks to 5 January 2014
