Woolworths revises down guidance, says not satisfied with sales

Madeleine Heffernan
February 25, 2015
The Age
Retail giant Woolworths has bitten the bullet and revised down its full-year profit guidance, after reporting an “unsatisfying” first-half sales result and the departure of its supermarket boss.
Reporting results that missed analyst expectations and pledging to invest in its flagship supermarkets, Woolworths says it now expects annual profit growth to be as low as 1.8 per cent, having earlier predicted growth of between 4 and 7 per cent.
“While there is a clear path to meet the guidance provided of net profit after tax [NPAT] of 4 to 7 per cent in the 2015 financial year, we have decided to provide ourselves with additional flexibility to make the necessary investments to deliver on our long-term plans and the associated shareholder value creation,” the company said in a statement.
“These investments will impact the second-half 2015 results and as a result we are amending guidance.
“Factoring in the planned investment initiatives, our expectations are that 2015 financial year NPAT will be towards the lower end of the current analyst NPAT growth growth forecast range for the 2015 financial year of 1.8 per cent to 6.6 per cent.”
The downgrade was the subject of much speculation and comes as Woolworths reported a 3.1 per cent decline in first-half net profit, to $1.28 billion. Underlying net profit, excluding a $103.7 million provision related to its discount department store Big W, rose by 4.7 per cent to $1.38 billion, in line with expectations.
Total group sales grew by 1.8 per cent to $32.4 billion, below expectations, for the six months ended 4 January 2014. Earnings before interest and tax [EBIT] fell by 3.3 per cent to $1.98 billion.
Woolworths also announced the departure of its managing director, Australian Supermarkets and Petrol. Tjeerd Jegen, who has been at Woolworths since 2011, will return to Europe.
The departure has led to Brad Banducci being appointed managing director, Australian Food and Liquor, and Dave Chambers being appointed direcftor, Woolworths Supermarkets.
Mr Banducci will continue to have responsibility for Woolworths Liquor Group until a new appointment is made. Mr Chambers has been the MD of Progressive Enterprises in New zealand for four years.
Woolworths said despite “strong” 7.3 per cent growth in EBIT for Australian Food, Liquor and Petrol, it was “taking action through investment in our Australian supermarkets business to maintain our leadership and restore sales momentum.”
“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 $500 million, which we are currently building.”
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