Slow Growth Forecast for Woolies

Submitted by Sharemarket News on 26 August, 2011 - 10:39

Woolworths' (ASX:WOW) market value lost about $2 billion yesterday after the supermarket giant warned that profit could grow as little as 2 percent due to consumer caution. Shares dropped 5.6 percent to $25.75, the company's worst one-day fall since February 2009.

Woolies posted a net profit of $2.128 billion after tax for the 52 weeks to June 26, up 5.1 percent from $2.038 billion last period. Sales were up 4.9 percent to $54.506 billion.

Although in line with market expectations, the 2011 profit growth was the company's weakest in 12 years. Chief executive Michael Luscombe said that this was "a sound result, given prevailing macroeconomic and market challenges".

But he warned of even more challenging times ahead and said that trading would be "subdued." He forecast profit growth to increase by 2 to 6 percent, well below the 8.4 percent average forecast by analysts.

"There's no doubt that we've seen during July and August the subdued customer spend that we experienced in late May and June has continued," said Luscombe.

"Consumer confidence has fallen . . . consumers are electing to save rather than spend, and for discretionary businesses this will be a particularly tough year."

The company declared a final dividend of 65 cents per share, up from 62 cents the previous year.