Woolworths Meets Its Annual Forecast

Submitted by Craig Strzelecki on 17 July, 2008 - 09:16

Australia's biggest retailer, Woolworths Ltd., met its full year profit forecast even as the country reels under rising fuel prices and escalating borrowing costs which slowed down the fourth quarter sales to just 7.5 percent. Earnings before interest and tax (EBIT) is expected to grow faster than sales as net profits seem to fall in the growth range of 21 percent to 25 percent. The retailing giant marked rise in total sales for 53 weeks ended June 29 to $47.035 billion or 10 percent higher. On normalised basis, that excludes extra trading week in the year, the sales were up by 8.7 percent. Sales from the supermarket rose to $40.313 billion which were up by 8.3 percent on normalised basis. Similarly, the food and liquor business climbed 9.9 percent to $30.5 billion this year as the liquor sales were slightly up to $4.7 billion.

The Australian households have been suffering due to rising petrol prices and increasing food costs, nevertheless, Woolworths registered an increase in both number of customers as well as higher spending per basket. It projects a full year profit growth between $1.56 billion to $1.61 billion.

Woolworths' Chief Executive, Michael Luscombe stated that fiscal year 2008 had been quite rewarding as it opened more supermarkets and liquor stores while petrol earnings grew on the back of rising fuel prices. It has already opened 30 new supermarkets and 22 new Dan Murphy liquor store. The group's Everyday Reward Card program was also highly successful as it rolls out three million cards. The new fiscal year has already marked a good start with strong July sales as compared to weak June month and the company shall report its annual profits in late August.

Share prices for Woolworths lifted 80 cents or 3.4 percent to $24.26 backed by strong super market sales. It also reflects strong growth in Australia and New Zealand while it has expansion plans for its wholesale business in India. It has already made its foray in India with a venture with Tata in consumer electronics. However, according to Luscombe, the company still awaits changes in foreign investment policy in India and continues to hear and see smoke signal consistently.