Woolies' $1.8b profit built on supply chain investment

Woolworths shrugs off economic downturn to announce almost $2 billion profit, built on transport investment

By Brad Gardner | August 27, 2009

Supermarket giant Woolworths has shrugged off the economic downturn to announce an almost $2 billion profit, which was built on the back of investment in its transport operations.

In releasing its end of financial year results today, Woolworths credited its innovative end-to-end supply chain program for generating significant returns and cutting expenses.

Despite a turbulent year, Woolworths reported a 12.8 percent jump in net profit to $1.83 billion. Its Australian food and liquor sales grew by 17.4 percent from $1.91 billion to $2.02 billion, with Woolworths’ gross margins increasing by 36 basis points.

"The eight-year investment in supply chain is now clearly generating significant returns well beyond original expectations," the company says.

Woolworths Managing Director and Chief Executive Michael Luscombe said the company could not afford "to rest on our laurels".

"Our goal is to grow our business and deliver opportunities to our employees and value to our customers and shareholders," he says.

Luscombe referred to the $1.8 billion profit as a "solid result" considering the economic downturn and says the return was supported by Woolworths’ investment in its business.

Although Chairman James Strong says there are still financial challenges ahead due to current economic conditions, he is confident Woolworths is ideally placed.

"Woolworths is well positioned going forward and will continue to invest to develop both core and new business opportunities in order to enhance shareholder value," he says.

There was a 13 percent increase in the dividend per share to $1.04, while earnings per share jumped 11.7 percent to $1.50.

Perhaps the only negative for the company was that petrol sales of its retail division fell 0.5 percent to $5.5 billion due to lower petrol prices. Woolworths owns 542 petrol stations nationwide, which includes 133 in alliance with Caltex.

Read the full story on Woolworths' profit results and the supply chain transformation on sister publication SupplyChain Review: click here.

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