Agribusiness

Woolies logs big 5.6pc sales gain, despite ‘value-hungry’ consumer sentiment

12/04/2013

Retailer Woolworths Limited today announced third quarter sales from its Australian supermarket operations of $9.95 billion, an increase of 5.6 percent on the previous year, despite a continuing ‘value-hungry’ sentiment evident among consumers.

When this year’s early Easter holidays is factored into the result, supermarket sales were up 4.9pc on the same period last year.

It was Woolworths’ largest same-store sales growth since late 2011, but the percentage growth figure is likely to be topped by Coles’ result due for release next week, analysts say.

The supermarket division generated about three quarters of Woolworths Ltd’s overall third quarter sales of $12.82 billion, which also included liquor, petrol, Big W, hotels and Masters home improvement divisions.

Chief executive officer Grant O’Brien said the momentum experienced in the first half of the 2012-13 year had continued into the third quarter, ended March 31.

"The underlying performance was strong despite challenging retail conditions, particularly in general merchandise,” Mr O’Brien said.

However he cautioned against talk that consumer sentiment had turned the corner.

“I would say that continuing improvement in sales is some evidence of customers feeling more positive, but I think we have to be guarded in how we talk about that,” he said.

Customers remained ‘value-hungry,’ and the company “had a huge responsibility to ensure that the household budget stretches as far as it can.”

Consumer spending remained highly sensitive to global economic conditions, Mr O’Brien said.

The company’s Australian Food (supermarket) and Liquor division delivered a strong result with sales increasing by $500 million or 5.6pc up on the previous year. Momentum grew during the quarter with Easter trade in March also pleasing.

Woolworths continued to increase market share, customer numbers, basket size and items sold when compared to the prior year. Online sales increased 36pc for the quarter compared with a year ago, reflecting the success of the company’s multi-option strategies and the ongoing changes to customer shopping preferences.

Woolworths managing director Australian Supermarkets, Tjeerd Jegen, said the third quarter result was a good one, which saw momentum growing as the period progressed as well as pleasing trading over the Easter period.

Mr Jegen said results across the company’s fresh food business were again very pleasing, with meat, seafood and produce performing particularly well. The recent push to lower the price of fresh lamb by 15pc had increased sales volumes by 30pc, he said.  

The standard shelf price movement index for the quarter was inflation of 1.2pc, down from 1.3pc for the previous quarter. This was impacted by high vegetable prices as a result of the Queensland floods and unusually high temperatures in the Victorian and South Australian growing regions.

Excluding produce, the shelf price index for the quarter was inflation of 0.8pc.

Average prices continued to experience deflation for the quarter of 2.5pc when the effects of promotions and volumes are included. Part of this deflation resulted from the continued lowering of prices, designed to “deliver value to our customers.”

During the third quarter, Woolworths opened four new Australian supermarkets bringing the total to 888, and a further 47 stores were refurbished. A further 13 supermarkets will be opened before June 30.

Analysts said Woolworths’ supermarket division appeared to be generating volume growth in the face of price deflation. On that basis, it was reasonable to assume that the company was gaining market share, despite the retail giant’s recent claim to the ACCC that it had not lifted its market share over the past five years.

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