The Reserve Bank’s campaign to slow inflation by slowing consumption activities like retail sales has hit the final quarter sales of the country’s biggest retailer, Woolworths.
Woolies says 2008 earnings before interest and tax will still grow faster than sales. It’s still a strong sales performance but there are signs of the slowing level of activity appearing.
Net profit is expected to grow in a range of 21% to 25%, the company said today in its 4th quarter and 2008 sales figures release. That’s unchanged from guidance in February when the interim profit was announced.
Total sales in the quarter rose to $11.40 billion from $9.83 billion a year earlier: some of that resulted from higher petrol prices in the quarter, while lower prices for fresh fruit and vegetables cut food price inflation in supermarkets.
Woolies shares rose as much as 5% after the sales update but it eased gradually to finish up 26 cents at $24.26.
Taking out an extra week in the fourth quarter of this year compared with last year, sales rose 7.5% to $10.56 billion, just short of analysts’ expectations for sales of around $10.67 billion on the same basis. Sales growth in 2007 was 9.6%. With the extra week in sales rose 7.5% to $11.4 billion for the group as a whole.
For the year sales were still up an impressive 8.7% to $42.3 billion, with supermarkets up 8.3% to $36.52 billion, general merchandise (Big W and consumer electronics), up 12.3% to $4.77 billion and Hotels up 5.9% to $1.03 billion for the year. Liquor sales for the year hit $4.7 billion, up from the $4.1 billion in 2007.
Across all divisions, the retail giant saw a sharper than expected slowing in what retailers call same store, or comparable sales: that’s sales from stores open a year or more.
The drop is especially evident in the core of the company’s business, its huge Australian supermarkets and liquor business.
The company said food price inflation dropped to 2.9% in the final quarter and for the year after peaking at 4.5% in the March quarter. The fall was due to a sharp drop in fruit and vegetable prices as the drought broke in some growing areas.
Overall sales rose 9.9% in supermarkets, but same store sales rose 4.9% in the final quarter, compared to a 14.9% jump in headline sales (unadjusted for Easter and a 53 week year).
The rise in same store sales in the 4th quarter was under the 6.3% rate for the division for the whole year and the peak of 7.6% in the first quarter of the year.
Same store sales growth for the full year in 2008 was slightly slower than the 6.6% growth figure in the 2007 financial year.
The figures for each of the four quarters shows a decline, despite relatively strong sales growth overall as the company opened 30 new supermarkets and revamped others. That was five to ten supermarkets more than its planned 15 to 25 a year.
In the Big W chain of general merchandise outlets, same store sales growth slowed to just 2.6% in the 4th quarter, compared to 4.7% for the year as a whole and 9.6% in the first quarter.
Top line sales growth was 13% for the year and 12.7% for the quarter. Big W total sales rose 13% in the fourth quarter, boosted by 9 new stores with management saying it experienced tighter trading conditions in June.
Petrol sales rose 20% on 1.8% growth in volume in the fourth quarter from stations open for more than a year.
Supermarket sales in New Zealand rose 3.5% from stores open more than a year. Inflation was a problem and at 4% was greater than the rise in same store sales in the quarter.
Fourth quarter sales in consumer electronics rose 16.3%, boosted by 5 new store openings in the quarter. Comparable-store sales rose 3.8%.
In the Dick Smith and Tandy consumer electronics business comparable sales growth slowed to 3.8% in the 4th quarter, under the 4.4% for the year and a peak of 5.3% in the Christmas in the December quarter. Top line sales growth was mixed.
Sales at the hotels unit rose 1.1 % to $264 million, compared with 8.6% a year earlier, as smoking bans cut traffic. Same store sales fell 1.6%. The division is the country’s biggest pub owner, so that sector must be doing it tough.
