Oct. 20 (Bloomberg) -- Woolworths Ltd., Australia’s biggest retailer, posted its slowest first-quarter sales growth in at least 15 years as falling fuel prices curbed gains at its domestic supermarkets.

Sales rose 4.2 percent to A$13.4 billion ($12.4 billion) in the three months ended Oct. 4, from A$12.8 billion a year earlier, Sydney-based Woolworths said in a statement today. Excluding fuel, revenue rose 7.4 percent, missing the 9 percent estimate of Phillip Kimber, an analyst at Goldman Sachs JBWere Pty. in Melbourne, who rates the stock a “hold.”

A 20 percent drop in fuel prices limited gains in grocery sales from the company adding Qantas Airways Ltd. to its loyalty program, which is helping win sales from second-ranked Wesfarmers Ltd. and boosting average customer spending per visit. Woolworths affirmed its forecast for annual sales growth in the “upper single digits,” excluding fuel.

“The market had been looking for 5 percent growth in group sales so it’s likely to be disappointed,” said Ben Potter, an analyst at IG Markets in Melbourne. “The stock has underperformed both the market and Wesfarmers and is likely to continue to do so as sharp upward re-ratings are unlikely following this result.”

Woolworths shares fell 24 cents, or 0.8 percent, to A$30.28 at the close of trading in Sydney. The stock has gained 14 percent this year, lagging behind the 30 percent advance in the benchmark S&P/ASX 200 index and a 55 percent increase in shares of Perth-based Wesfarmers.

Australian Supermarkets

The growth in first-quarter sales was the slowest for the period since Woolworths sold shares to the public in 1993.

Sales from Australian supermarkets, the company’s biggest division, rose 7.8 percent to A$9 billion with revenue from stores open at least a year gaining 5.8 percent. Same-store or comparable sales strip out the effects of recently opened outlets.

“We believe Woolworths real growth will remain firm given the loyalty program alliance with Qantas,” Craig Woolford, an analyst at Citigroup Inc. in Sydney, said in a note to clients today.

Fuel sales fell 16 percent in the quarter to A$1.4 billion, with the company getting an average of A$1.23 a liter compared with A$1.53 a liter a year ago. Sale volumes rose 3.6 percent.

Fuel Discounts

Woolworths attracts shoppers to filling stations by offering a 4 cents-a-liter discount on fuel when they spend at least A$30 at its supermarkets.

Chief Executive Officer Michael Luscombe said it was too early in the financial year to reassess his forecast for annual profit growth of as much as 11 percent, after the end of A$20 billion of government stimulus payments to households since December.

“We could be bullish, but I think that would be irresponsible,” Luscombe said in a telephone interview today. “We would rather be conservative, get to January and see what the relative weight of macroeconomic factors are.”

The company’s New Zealand supermarkets unit posted a 5.4 percent increase in sales to A$1.1 billion. Revenue at the Australian hotels unit rose 1 percent to A$303 million.

Big W, the company’s discount department-store chain, posted a 5.8 percent advance in sales to A$1.1 billion. Same- store revenue rose 3.9 percent.

The consumer electronics unit, which includes the Dick Smith brand, increased sales 13 percent to A$462 million.

The Australian Woolworths isn’t related to London-based Woolworths Group Plc, which was founded in 1909 as part of its U.S. parent’s expansion, or Woolworths Holdings Ltd. based in Cape Town, South Africa.

To contact the reporter on this story: Robert Fenner in Canberra rfenner@bloomberg.net

Last Updated: October 20, 2009 01:58 EDT