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Woolworths Reports Fourth-Quarter Sales of $10.3 Billion; Shares Decline
Woolworths Ltd., Australia’s biggest retailer, said sales growth slowed in the fourth quarter on tamer food inflation and as the government withdrew stimulus spending. The shares fell.
Revenue rose 3.9 percent to A$11.6 billion ($10.2 billion) in the three months ended June 27 from A$11.1 billion a year earlier, Woolworths said in a statement today. The shares fell the most in almost seven months as sales growth slowed from 4.7 percent in the third quarter.
Demand for clothing, groceries and electronics is slowing following the end of more than A$10 billion in cash handouts to families that boosted 2009 sales at the Sydney- based retailer. Woolworths also faces a challenge from second-ranked Wesfarmers Ltd., which intends to win customers with revamped supermarkets at its Coles chain.
“It’s got everything to do with the stimulus,” Woolworths Chief Executive Officer Michael Luscombe said in a telephone interview today. “We were far and away the biggest recipient of the extra money that was in the community’s hands last year and we have to cycle that.”
Woolworths shares fell 49 cents, or 1.8 percent, to A$26.19 at the 4:10 p.m. market close in Sydney, their largest decline since Jan. 28. The stock has fallen 6.5 percent this year compared with a 9.4 percent decline in the benchmark S&P/ASX 200 index.
Slowing Growth
Adjusted for the timing of Easter holidays in April, sales growth slowed to 4.3 percent in the fourth quarter from 5.4 percent a year earlier.
“The weak sales result highlights challenges in cycling fiscal stimulus and the drag of low food inflation in the fourth quarter,” Craig Woolford, an analyst at Citigroup Inc., said in a note to clients today. “We believe that this weakness is temporary.”
Woolford, who rates Woolworths shares “hold,” had estimated fourth-quarter sales growth at 5 percent.
Full-year sales rose 4.2 percent to A$51.7 billion. Food inflation slowed to 1.1 percent in the 12 months compared with 4.1 percent in the previous year, Woolworths said.
Revenue from Australian supermarkets, the company’s biggest division, rose 2.8 percent to A$7.8 billion in the quarter.
Grocery Sales
Sales from domestic grocery outlets open at least a year gained 1.8 percent compared with Citigroup’s 1.5 percent estimate. Same-store or comparable sales strip out the effects of recently opened outlets.
The company’s New Zealand supermarkets unit posted a 5.4 percent rise in sales to NZ$1.2 billion ($859 million). In Australian dollar terms, the division posted a 5.6 percent rise in revenue.
Fuel sales rose 12 percent in the quarter to A$1.3 billion.
Woolworths attracts shoppers to its filling stations by offering a discount of at least 4 cents a liter on fuel when they spend more than A$30 at its supermarkets.
Big W, a chain of discount department stores, posted an 11 percent fall in sales to A$808 million. Adjusted for Easter’s timing, Big W revenue fell 9.3 percent in the fourth quarter, compared with 13 percent growth a year earlier.
Year-Earlier Sums
“Big W is alive and well and doing really well in terms of volume,” Luscombe said. “We just need to cycle over these year-earlier sums.”
Sales at the consumer electronics unit, which includes the Dick Smith brand, rose 3.4 percent to A$395 million as growth in India limited the effect of declining demand in Australia.
Revenue at the Australian hotels unit, the nation’s biggest pub owner, fell 1.6 percent to A$247 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 Melbourne rfenner@bloomberg.net
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