Discount war hurt Woolworths

Blair Speedy
The Australian
April 20, 2012

RETAIL giant Woolworths today reported flat sales growth at its supermarkets division during the third quarter, setting itself up for an eleventh straight quarter of underperformance against arch rival Coles.

Woolworths reported total sales of $14.072 billion for the 13 weeks to April 1, up 3.8 per cent from the previous third quarter.

Sales from the company’s largest earnings generator, the Australian food and liquor division, rose by 2.9 per cent to $9.4bn.

However, this growth was entirely due to new store openings, without which the supermarkets business would have recorded zero sales growth.

The retain chain also said that uncertainty caused by the carbon tax and interest rates made it cautious about the coming months.

Chief executive Grant O’Brien said: “We continue to remain cautious about the sales outlook for the fourth quarter, particularly given consumer and business uncertainty about the impact of the carbon tax and interest rates.”

Woolworths supermarkets have lagged the Wesfarmers-owned Coles chain in terms of sales growth from existing stores for the past 10 quarters, a trend that is expected to be confirmed next week when Wesfarmers’s retail divisions report third-quarter sales.

Mr O’Brien, said the result was distorted by the impact of Cyclone Yasi and flooding in Queensland, which inflated the previous third quarter’s result as shoppers engaged in panic buying and a number of competitor-stores were forced to close.

The CEO also said a cool summer in the eastern states also affected sales of soft drinks, ice creams and insecticides.

The result was also affected by further reductions in shelf prices, which fell by 4.4 per cent overall during the quarter, driven by lower produce prices and competitive discounting.

Supermarkets boss Tjeerd Jegen said that, while conditions were challenging during the quarter, Woolies managed to increase market share, customer numbers and the number of items sold.

Woolworths also reported a rebound in sales growth at its Big W discount department store chain, which reported sales of $931m, up 1.4 per cent, following a 1.4 per cent decline in the first half of the financial year.
With AAP