Woolworths Profit Meets Estimates as Store Additions Spur Sales

Woolworths Ltd. (WOW), the largest retailer outside the U.S. and Europe, posted first-half profit that matched analyst estimates as the number of stores increased and a measure of sales rose at the fastest pace in 11 quarters.

Net income rose 15 percent to A$1.32 billion ($1.18 billion) in the six months ended Jan. 5, from A$1.16 billion a year earlier, the Sydney-based company said in a regulatory statement today. That was in line with the A$1.3 billion average of three analysts’ estimates compiled by Bloomberg.

Improved earnings give Chief Executive Officer Grant O’Brien more firepower to lift the company’s share of Australia’s grocery market and fund the expansion of its Masters hardware chain. Sales from Woolworths stores open at least 12 months increased by 3.4 percent in the second quarter and a measure of shelf prices climbed 2.1 percent, in both cases the fastest rates since 2011.

“This is the year when you’ll see the changeover from grocery price deflation to inflation” which will in turn boost future revenue and earnings, Jeremy Hook, investment director at TMS Capital Pty. in Sydney, said before the earnings announcement. “It helps not having to contend with deflation and shows how well they’ve done in the past.”

A measure of net profit will rise by 5 percent to 7 percent in the full year, up from a previous forecast of 4 percent to 7 percent, the company said today.

Woolworths shares closed down 0.3 percent at A$36.42 in Sydney yesterday, marking a 7.6 percent rise so far this year that’s outstripped the 1.1 percent improvement in the S&P/ASX 200 index.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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