Woolworths Ltd, Australia’s largest grocer, has said 2010 will be a “challenge” for retailers with the retailer expecting competition to be fierce around the fourth quarter.
Speaking on an earnings conference call yesterday, CEO and managing director Michael Luscombe told analysts that the last six months had been an “interesting half to say the least” and that 2010 was going to be “a difficult one to predict”.
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“Historically-low interest rates, people staying at home, and slow restaurant trade” had an impact on sales, Luscombe said.
The Woolworths boss said the business was also lapping the December 2008 government stimulus package that benefited spending in January 2009.
“Due to our customer focus, we were very well positioned and therefore received a clear benefit from the stimulus package in the prior financial year,” Luscombe said. “What we found last year was those categories that did reasonably well in December at Dick Smith and Big W also did well in January.
“So our presumption is they are going to be challenging in January as well.”
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By GlobalDataThe retailer yesterday saw first-half sales growth more than halve from a year ago.
First-half sales for the 27 weeks to 3 January rose 4.2% to reach A$27.2bn (US$24.42bn). The figure slowed from a growth of 8.8% in the previous year.
Woolworths shares fell 2.5% to A$26.800 at 16.10 AEST yesterday.
Luscombe said the firm had had “good solid growth in volumes” and said he was “comfortable” the retailer had achieved “a very solid result” given the “drastic reduction in food inflation”.
“I think the main selling point has been that this is a business that has been built to operate in these circumstances. The vast majority of our business has been in food and liquor and we still stand very strong in our volume sales. Our supermarkets have never been as strong,” Luscombe insisted.
He added that Woolworths remained on track to achieve its 3% growth guidance in food for the year.
