Woolies pulls in "solid" profit; tips growth in 2012

Woolworths continues to strengthen its position in the retail market with a 5.1 percent increase in sales

By Ruza Zivkusic | September 27, 2011

Woolworths continues to strengthen its position in the retail market, reporting a 5.1 percent increase in food and liquor sales during last financial year.

The company reported a net profit of more than $2 billion, and Woolworths Chairman James Strong says the company is well positioned to benefit from an upturn in the economy.

"This is a solid result given the economic challenges of cycling the prior year’s stimulus packages, the significant decline in inflation and the emergence of a more conservative consumer in the second half of the year," Strong says.

"This result was achieved on the back of a year of significant global economic challenges.

"The strength of our business has allowed us to lead the market in investing significantly in reducing shelf prices in Australia and New Zealand and to do so profitably."

Woolworths expects its net profit for the coming year to grow between eight and 11 percent, but adds that it is subject to consumer confidence levels, inflation, interest rates and global economic conditions.

Its earnings this year will also be affected by start-up costs for its new Masters home improvement business of as much as $100 million, which will affect earnings in 2012.

The new business, which is located in Melbourne’s Braybrook, is taking on heavyweight Bunnings which is owned by rival Coles.

Its supply chain is also expected to deliver financial benefits, with distribution centres in Brisbane, Melbourne and Sydney providing significant ongoing capacity to respond to changing market conditions.

Petrol sales were $5.5 billion in line with last year but comparable sales have decreased by 1.7 percent during the year with comparable volumes increasing by 0.7 percent.

Its average sell prices were 3.4 cents per litre lower than the previous year. There are 561 petrol stations, including 132 Caltex Woolworths.
Woolworths opened 20 new petrol stores and 26 supermarkets last year.

The board announced a $700 million off-market buy-back as the next step in its ongoing capital management program.

There are 3199 stores across Australia and New Zealand, with 188,000 retailers. Its online sales have more than doubled compared to the previous year.

Meanwhile, departing Woolworths CEO Michael Luscombe has taken a pay cut from $8.33 million to $5.73 million.

He is due to retire at the end of the month and will hand his role over to Grant O’Brien.

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