March 1, 2013
Eli Greenblat
WOOLWORTHS boss Grant O’Brien has cast himself as the consumers’ friend by warning low prices at the supermarkets were here to stay, no matter the protests from squeezed suppliers.
Mr O’Brien, now two years at the helm of Australia’s biggest supermarket chain, also pledged he would continue to lean on food, grocery and petrol prices despite fresh investigations by the competition regulator. But he did hold out a small olive branch to suppliers, saying they had a vital part to play in the Woolworths business and broader Australian economy.
”We can’t serve the customer if we don’t have a supplier base so we are very aware of that and we work every day with suppliers,” Mr O’Brien said.
”We can’t have the business that is just lower price for the sake of lower price without regard to the manufacturing base – if we do that we don’t have a business. We are very aware of that and [it is] something that we are looking at.”
But if rival Coles and the legion of independent supermarkets were hoping for a let-up in the supermarket price war, which has intensified in the past two years and has featured $1-a-litre milk and discounted petrol, they will be disappointed as Mr O’Brien and his team pull more levers to drive earnings growth for Woolworths shareholders.
He said Woolworths had a ”contract” with the community.
”We have a contract with our customers to provide an offer that helps them deal with the cost of living and the rising cost of living, and petrol is a lighting rod for that in any household economy.
”The customer is wanting to lower their cost of living so they can balance their budget, and the supplier obviously has to maintain a sustainable business. We operate in between and we wear the praise of the customers and scorn of the suppliers some time.”
Woolworths on Thursday posted a 19.4 per cent increase in half-year net profit to $1.15 billion, while profit from continuing operations and significant items was broadly in line with expectations at $1.24 billion, up 5.5 per cent. ”What we have delivered here is an improved result and that’s what the team have been focused on … steadily improving this business,” Mr O’Brien said. ”It is a good result, but it’s a sustainable result as well and that’s what I’m pleased about.”
Mr O’Brien also played down suggestions Woolworths had matured as a business. ”We have got plenty of growth levers available to us into the future and I see plenty of upside and I don’t see a mature business at all.”
Revenue for the half hit $30 billion for the first time, up 4.8 per cent, while its flagship Australian supermarkets division saw earnings before interest and tax rise 6 per cent.
Woolworths raised its profit guidance yesterday to 4-6 per cent growth for the financial year from an original range of 3-6 per cent.
Mr O’Brien defended Woolworths’ dealings with suppliers as questions over alleged predatory behaviour by supermarkets drowned out attempts to focus on the retailer’s performance.
”Our role as retailer is positioned midway between the customer and the producer and it’s a balance we play every day,” Mr O’Brien said. But ultimately Woolworths would side with its customers and investors.
Shares in Woolworths ended up 92¢ at $34.93. The company declared a fully franked interim dividend of 62¢ a share, up 5.1 per cent.
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