Ka-ching! Woolies checks out $2.1b profit

Jon Condon, 26/08/2011

Supermarket giant Woolworths has posted a net profit after tax of $2.124 billion for the year ended June 30, up 6.4 percent on a year earlier when this year’s natural disaster costs are excluded.

The result comes on the back of a surge in fresh produce (includes beef) sales and solid return on the company’s investment in alcohol sales.

Company wide sales were up 4.7pc to $54.143 billion, the full financial disclosure issued on Thursday said. 

Managing director Michael Luscombe described the result at sound given prevailing macro-economic and market challenges.

“It was delivered in a particularly challenging retail environment with tightened consumer spending and devastating natural disasters. The result demonstrates our focus on sustainable long-term profitable growth that delivers enhanced value to customers and shareholders through all economic cycles,” he said.

The 2010-11 financial year in Australia had seen consumer spending stall, individual savings levels increase, household utility costs rise sharply and interest rates increase in the first half of the financial year.

Consumer spending was further weakened by the poor weather in Australia during the crucial Christmas trading period and the natural disasters in Queensland and Christchurch, which incurred $38 million in direct additional costs.

“During the year Woolworths continued to focus on meeting customer needs by improving ranges, formats, and merchandising across all brands. We invested strongly in price by leveraging the capability of our business model and as a result our business grew market share, sales and profits,” Mr Luscombe said.

Gross margins for the group increased 12bps, reflecting the impact of moving from direct-to-store delivery to distribution centres in liquor, the benefits of global direct sourcing, improved shrinkage rates, increasing sales of exclusive brand products and the success of new store formats, after significant price investment.

Australian Food & Liquor division sales for the year were $36.2b, a solid increase of 4.3pc over last year. Comparable store sales for the year increased by 3pc. Growth was also seen in customer transactions, basket size, items sold and market share, particularly in fresh foods.

Contributing to this was new store formats, a presentation focus on key categories such as produce, meat and fresh bakery and an expanding ready-to-eat meal solutions range.

Along with Coles, Woolworths during the trading year reduced prices of more than 5000 products in meat, produce (where a long-term fresh food price guarantee now applies) and liquor.

Woolworths also continued to push into private label brands such as the expansion of its Macro Wholefood Market range (including meat protein) in the fast-growing ‘good-for-you’ category.

“We further underpinned our quality and value through initiatives such as price reductions on beef, the Fresh Food Guarantee, the expansion of Macro Wholefoods Market range and the continued development of Select and Homebrand products,” Mr Luscombe said.

During the year, 78 supermarkets were refurbished and 21 new stores opened, bringing total Australian outlets to 840.

Mr Luscombe, who will hand over the reins as CEO Grant O’Brien on October 1, said slower July and August sales did not auger well for prospects in the new financial year.

“Consumer confidence has fallen. Consumers are electing to save, rather than spend, and for discretionary businesses like supermarkets this will be a tough year, unless there is an economic pick-up,” he said.


Your email address will not be published. Required fields are marked *

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.


Get Beef Central's news headlines emailed to you -