Woolworths hurt by disappointing quarter

Grocery giant Woolworths Ltd said sales trends would become clearer by Christmas, after reporting a disappointing fourth quarter sales result.


Chief executive Michael Luscombe said he expected the government’s 2009 stimulus payments would completely wash through the economy by November.

However, higher interest rates and rising petrol prices were still hurting family budgets.

“From the home front, those on mortgages are paying more than they were last year so hopefully we don’t get too many more increases over the next year,” Mr Luscombe told AAP on Wednesday.

“Fuel prices are back up to the high $1.20 to $1.30 (a litre).

“People are just waiting to see what happens with the election – so getting that out of the way will be a good thing.”

Mr Luscombe said that by Christmas the economy would have cycled over many of those factors.

“We will be back into clearer air in terms of (sales) numbers, particularly in the discretionary and generally merchandise area,” he said.

“I’m very confident we’ll have a strong Christmas.”

The supermarket chain on Wednesday reported a full-year sales increase of 4.2 per cent, below market expectation of a five per cent lift.

Sales rose to $51.69 billion for the 52 weeks to June 27, 2010, from $49.6 billion a year earlier.

Ms Luscombe described it as a “strong volume and market share result”.

Australian food and liquor sales for the year were $34.68 billion, an increase of 5.1 per cent over the year before.

This sale included food inflation at 1.1 per cent for the year, reflecting deflation in produce and perishables over the period.

Woolworths said its strategy to reduce shelf prices was proving effective.

“This combination has driven increased market share, customer numbers, items sold and basket size,” the company said in a statement on Wednesday It said price deflation in home entertainment, toys and sporting goods and the absence of the stimulus affected Big W department stores, where sales dropped 1.7 per cent over the year.

Consumer electronics sales dropped by half a per cent in Australia and new Zealand with increasing price competition resulting in lower margins.

But Woolworths, which owns the Dick Smith and Tandy chains, hopes new products will help boost consumer electronics sales.

“There is no doubt that the iPad has been a tremendous stimulus for sales,” Mr Luscombe said.

“We’re eagerly awaiting the new and improved iPhone 4 to come out and hopefully there will be a few other new gizmos to stimulate the customer market.”

Hotel sales of $1.1 billion for the year represented a decrease of 0.7 per cent with comparable sales declining by three per cent.

This result was also hit by the declining effect of the government stimulus payments as well as reduced trading hours in Queensland and changes to regulation in Victoria, the company said.