Woolies chief says retail conditions worst he has seen

by: Jeff Whalley
From: Herald Sun
Source: Herald Sun


WOOLWORTHS chief Grant O’Brien has declared the weak conditions buffeting Australian retail are the worst he has seen and will sap life out of the industry for months to come.
And the nation’s peak retail lobby group has warned growth in Christmas sales will be negligible this year, falling short of inflation as cautious consumers keep a firm grip on the purse strings.

Ratcheting up its push for another interest rate cut in December, the Australian Retailers Association said traders counting on the festive season needed to brace for a downbeat Christmas.

The warnings came on another dark day for the sector, with David Jones revealing that sales plunged 11 per cent in the three months to October 29.
Shares in the upmarket department store group tumbled more than 5 per cent to their lowest level in almost two months.

Mr O’Brien, speaking at Woolworths’ annual meeting, said: “It is probably the most challenging period in retail I have ever seen in my career”.
“In the short term, the realities and challenges mean we believe trading will remain subdued, most probably through to the next financial year.”
Chairman James Strong said that 2011 was “undoubtedly one of the most challenging years the retail sector has seen for some time”.

Releasing its projections for Christmas trading, covering the period from mid-November to Christmas Eve, the ARA said consumers would forego gifts for food.
Victorian retailers are forecast to ring up $10.1 billion in sales – up just 1.5 per cent on last year.
Nationally, sales are expected to climb 2.2 per cent, fuelled by strong growth in Western Australia.
As a result, shops will be “going backwards”.

Inflation is running at 2.45 per cent on an underlying basis, which strips out volatile price movements, and 3.5 per cent on a “headline” basis.
ARA director Russell Zimmerman said retailers that “traditionally count on the festive season as their biggest trading period will be bracing themselves for more of the disappointing trade they have experienced over the last 18 months”.

“Shoppers will more likely opt to spruce up the house and put on a family feast rather than put more presents under the tree,” he said.
At Woolworths, Mr O’Brien said that despite the conditions, the group’s namesake supermarket chain would continue rolling out new stores and investing in house-brand products.
The group is maintaining a “long term aspiration” of high single-digit sales growth and 10 per cent growth in earnings per share, he said.
Its shares closed almost 1 per cent higher at $24.56.

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