Australia’s largest supermarket group Woolworths has posted a better-than-expected 24% increase in net profit to A$295.5m (US$153.7m) for its first half, ended 6 January.
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Taking out the one-off income security payment of A$24m, net profits rose 19.7% year on year to A$317m, while earnings per share jumped 27.4% to 28.5c. Overall H1 sales were A$12.75bn, a rise of 13% and company chairman James Strong described the H1 result as “a strong performance in a very competitive environment”.
The supermarket division generated the bulk of Woolworths’ sales revenue, breaking A$10bn for the first time, and reporting earnings before interest and tax (EBIT) up 24.7% to A$398.1m.
Woolworths is on track to produce double-digit earnings growth for its third successive year. Reporting the growth, CEO Roger Corbett added that earnings per share will increase by between 17% and 23% for the full year, while the company’s full year sales grow by 15% to A$24bn. Analysts are expecting a full year net profit of A$500-522m on these sales.
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The growth of the company’s market share is expected to outpace its largest rival Coles Myer during the full year, largely due to Woolworths’ acquisition of 72 Franklin’s grocery stores in 2001, which contributed a better-than-expected 4.4% to sales growth in Woolworths’ supermarket division.
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By GlobalDataCorbett stressed, however, that while Woolworths is interested in bolt-on purchases and larger acquisitions, its growth expectations are not reliant on them: “The growth that we need to sustain, the ongoing growth at Woolworths and the value for our shareholders, we believe we can sustain for the foreseeable future inside Australia.”
Corbett added meanwhile that there is enough customer demand to extend Woolworths’ Big W chain by five to six stores each year – from the existing 94 stores to 130. The number of petrol outlets is also expected to grow by about 80 to 300 within the next two years.
Turnover at Woolworths’ liquor division is set to rise from A$1.25bn to more than A$2bn, and opportunities also exist for the company to strike joint-venture deals in the wholesale area, which reported a 14.6% rise in H1 sales to A$424m.
Furthermore, Corbett revealed that he hoped the move by the Queensland Government to deregulate shopping hours would extend to other states: “Customers of Australia have voted with their feet and shown extension of trading hours is what they want.”
Shares
The better-than-expected bottom-line result boosted Woolworths’ shares to A$12.60 during the morning trade, close to its record A$12.63 intra-day high, which was reached last October. The stock closed up 34.8 cents, or 2.9%, at A$12.487.
