Woolies says investments are starting to bear fruit

Jane Harper
November 23, 2012
Herald Sun

RETAIL heavyweight Woolworths has mounted a fierce defence of its investment program as it battles to prise back momentum from arch-rival Wesfarmers.

Woolworths directors say the company is reaping rewards from its investment drive in what continues to be a difficult retail climate.

The group says cost cutting and new initiatives have helped the group deliver solid performances across its major businesses.

“There is no doubt we are experiencing most challenging conditions for retailers, with low levels of consumer confidence,” outgoing chairman James Strong said yesterday.

“The benefits of the investments in recent years in efficiency improvements, growth and innovation were on display in this result.”

It came as Wesfarmers received a boost from global ratings agency Moody’s, which lifted its credit rating on the conglomerate from Baa1 to A3.

Moody’s said the upgrade reflected Wesfarmers’ success in transforming the Coles supermarket chain.

Woolworths’ annual report reveals that the value of the group’s fixed assets and investments surged $1.16 billion in the year to June 24, to $9.85 billion.

The company last month reported that in its first quarter – the 14 weeks to September – food and liquor sales were up 4.6 per cent on the same quarter last year.

But Woolworths’ supermarket business was again outpaced by Coles, with growth of 4.9 per cent.

It was the 37th straight quarter that the Wesfarmers-owned chain has outpaced its Woolworths counterpart.

Mr Strong’s comments at Woolworths’ annual meeting yesterday came after the group comfortably fended off an activist push for limits on its poker machines.

Woolworths owns 75 per cent of Australian Leisure and Hospitality, which runs hotels across the nation with about 11,000 machines.

More than 97 per cent of shareholders voted against a resolution proposed by Social activist group Get Up! for limits of $1 a bet and a cap of $120 an hour on the amount fed into each pokie.

The group also wanted the machines to be used for no more than 18 hours a day.

Mr Strong said restrictions on the machines alone would not address the wider issue of problem gambling.

“Our measures to promote responsible gambling are above and beyond that required by regulation and we take pride in being, we believe, a leader in promoting responsible gambling,” Mr Strong said.

He retired as flagged after the meeting, following 12 years as a director and 11 as chairman.

Woolies’ hospitality interests by the numbers
Woolworths owns 75 per cent of Australian Leisure and Hospitality Group
Australian Leisure and Hospitalityowns 325 hotels across Australia
11,000 poker machines operate in those hotels – about 6 per cent of the nationwide total
In Victoria, Woolworths runs 93 hotels with more than 5500 poker machines
Woolworths’ earnings from poker machines are estimated at $140 million a year