Woolworths first-half profit slips

MITCHELL NEEMS
Business Spectator
INDUSTRIES RETAIL
Woolworths has lowered its full-year guidance range as it looks to pursue investments over profit growth after posting a slight decrease in first-half earnings.
In the six months to December 31, the retail giant posted a net profit of $1.28 billion, a 3.1 per cent decline on the previous corresponding period’s $1.322bn.
Analysts had expected a net profit of $1.37bn, according to Bloomberg.
But it beat market expectations by lifting its underlying net profit 4.7 per cent to $1.38 billion, compared to expectations for a 3.7 per cent rise.
Food and liquor sales were up 3.4 per cent on a year ago, while comparable sales were up 1.7 per cent.
Gasoline sales fell 9.8 per cent to $3.31bn, while its supermarket sales in New Zealand were 1.1 per cent higher than a year earlier at $3.05bn.
In the same period, revenue rose 1.9 per cent to $32.68bn.
The company will pay a fully-franked interim dividend of 67c on April 24 to shareholders on the register at March 20. The payment is slightly higher than the 65c interim dividend paid a year earlier.
Woolworths lowered its target for full-year net profit after tax growth, which it had previously set at between 4 per cent and 7 per cent.
The retailer said, while there was a clear path to achieve this range, in pursuit of increased flexibility it will undertake investments to help it deliver on long term plans and unlock shareholder value.
These investments will impact second-half profit and thus guidance is being amended, Woolworths said.
The retailer said the range of analyst net profit after tax growth forecasts for the full year is 1.8 per cent to 6.6 per cent.
“Factoring in the investment initiatives now planned, our current expectations are that growth in FY15 net profit after tax before significant items will be towards the lower end of this range,” chief executive Grant O’Brien said.
Woolworths said the investment in Australian supermarkets will span all aspects of the customer offer and will be funded in part by a pipeline of cost savings in excess of $500m.
Further information is expected to be revealed at an investor strategy day on May 6.
Yesterday, Woolworths joint venture partner in its Masters home improvement stores, Lowes, revealed the business recorded a loss of $36m in the last quarter, just ahead of year-ago figures.
Home-improvement sales, including from the Masters joint venture with Lowes, were 24 per cent stronger at $988m.
Woolworths’ key rival, Wesfarmers — which owns Coles supermarkets — last week reported a 3.7 per cent decline in first-half profit to $1.376bn. However, earnings before interest and taxes from its Coles supermarket chain rose 7.1 per cent during the half, to $895m.
Woolworths and Coles, continue to slash prices for staples including milk and bread, while also offering more own-label products in their fight to lure customers and fend off competition from rivals, including German-owned budget supermarket operator Aldi.
The company also announced Brad Banducci, the current head of the company’s liquor business, will assume the role of managing director Australian food and liquor following the departure of Tjeer Jegen.
Mr Banducci will retain oversight of the liquor business until a new appointment is made and general manager of Dan Murphy’s Martin Smith will provide additional support to Mr Banducci until that time.
Dave Chambers, the current head of Woolworths New Zealand supermarkets, will become director of supermarkets, reporting to Mr Banducci.
— with Dow Jones Newswires