Woolworths to focus on Masters expansion

Published on Mon, 05/03/2012, 08:18:52

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Woolworths’ net profit after tax has dropped more than 16 per cent to $966.9 million, as a result of the Dick Smith restructure with expectations that trading conditions will remain relatively subdued for the rest of the year.

On the other hand, revenue was up 5 per cent to $29.91 billion.

Reaffirming its full year guidance for 2012, the company said: “Woolworths is well positioned in all its market segments and has a strong and sustainable business model geared towards the less discretionary retail segments.

“Therefore, we continue to expect growth of Net Profit after Tax, excluding the $300 million restructuring provision for Consumer Electronics, to be in the range of 2 per cent to 6 per cent in 2012 financial year, subject to the uncertainty in prevailing external conditions.”

More specifically, Woolworths reported a 3.2 per cent increase in half-year net profit after tax from continuing operations.

“This is a sound result considering subdued consumer confidence, deflationary pressures and the significant investment we are making in the business in line with our strategic priorities for growth,” Grant O’Brien, Woolworths CEO and managing director, said.

Woolworths plans for future growth, through expansion into the circa $40 billion Home Improvement market, with anticipation start-up costs for Masters in the full year of up to $100 million, which will be dependent upon a range of factors, particularly the pace of our new store roll out.

This comes after its home improvement joint venture business with Lowe’s saw sales increased 16.4 per cent to $412 million for the first half and increased 26.6 per cent to $224 million for the second quarter.

“Given prevailing macroeconomic and market challenges, along with the growth and the change agenda we are driving through our business, this is a commendable result,” O’Brien commented on the company’s investment into the hardware category.

During the half-year, Woolworths also concentrated on its focus on meeting customer needs where it served an additional 26.9 million customers, up 3.8 per cent, reflecting on improved customer buying power through price investment and deflation.

In its core division of Australian food and liquor, sales for the half‐year were $19.6 billion, an increase of 4.3 per cent over last year.

“Sales growth was impacted by significant deflation particularly in produce, seafood, bakery and deli in the second quarter. Produce deflation was experienced in all months of the second quarter and by December was double digit,” the company said.

“We continued to invest in price, particularly in the grocery, general merchandise and liquor categories. Sales growth was also dampened in the second quarter by cooler weather with the lowest December Australia wide temperatures since 2001. The impact was greatest in lines such as soft drinks, ice cream and deli items including salads, cold meats and roast chickens.”

Although the trading environment has remained tough, Woolworths increased market share, customer numbers, basket size and items sold. Grocery market share increased over the half.

Big W also saw positive returns with half-year sales increasing 1.3 per cent to $2.4 billion. Sales for the second quarter were $1.3 billion. Price deflation continued, averaging 5 per cent during the first half. Deflation was most evident in home entertainment and toys.


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