The market liked the second quarter and first half sales report from Woolworths, even though there were signs of a slowing pace of spending by some consumers.
The shares jumped 71 cents, or 2.7% to $26.91 after the sales update. That was in a market up around 1.3% on the day
The sales figures show a slowing in the last three months of last year, growing 8.1% for the period, down from first-quarter growth of 9.6%.Sales rose from $23.99 billion in the first half of 2007-08 to a record $26.1 billion in the six months to January 4.
But petrol sales growth fell from 30% in the first quarter to 15% for the six months as a whole as prices fell sharply and the value of each petrol sale declined in the December quarter.
That seems to have something of an impact on the overall sales performance.
The company is continuing to forecast sales from continuing operations to grow in the "upper single digits" for the full year, excluding sales from its highly volatile petrol business.
Apart form the slowdown in petrol there were no signs the retailer was hit by a slump in the quarter or in the first half. Even in the Big W and Dick Smith/Tandy chains sales growth was maintained at solid levels. Obviously the pre-Christmas bonus had some impact.
We will get more of an idea of the performance of retailing when the Harvey Norman first half and second quarter sales updates are released in the next day or so. They are likely to make unhappy reading after the company revealed late last year that comparable sales growth had gone negative for six weeks.
Woolies is still sticking to its forecast that its earnings before interest and tax will rise faster than sales growth: possibly up to 14% on a 52 week year comparison (2008 was a 53 week year).
"We are mindful that discretionary spending continues to be influenced by macroeconomic factors and by the recent events in global financial markets. Factors such as inflation, fluctuating petrol prices, interest rates, rising unemployment and consumer confidence levels are very difficult to predict in the current environment.
"Subject to the uncertainty regarding these factors, we expect sales from continuing operations to grow in the upper single digits (excluding Petrol Sales) on a 52 week basis. Earnings guidance for the full year will be provided in conjunction with the half year profit announcement on 27 February 2009."
The company’s CEO, Michael Luscombe told last year’s AGM it expected "Net profit after tax is expected to grow in the range of 9% to 12% on a 52 vs. 53 week basis (11% to 14% on a 52 comparative week basis).".
The company’s network of nearly 900 supermarkets and liquor stores in Australia posted 7.1% comparable store sales growth for the second quarter, leading the company to say that it was "pleased with the Christmas trading period" and had experienced "increasing numbers of customers shopping in our stores".
A quarter earlier, food and liquor sales grew 6.0% on a comparable store basis, which includes only stores open at least a year.
But with food price inflation up to 4.8% in the second quarter, from the 3.2% rate reported in the September period, there seems to have been a slowing in sales volumes in the supermarkets and liquor business.
Same store (comparable) sales were up 7.1% with food inflation running at 4.8%, compared to a 6% rise with inflation at 3.2%.
But there was a better looking result at the retailer, general merchandising chain, Big W, where comparable store sales rose 6.4% in the second quarter, the ninth consecutive quarter of positive comparable sales expansion for the 155-store chain.
Comparable sales in the first quarter were up 4.4% (making 5.6% over the half), so there was no sign of any slowdown, as other retailers have been reporting.
"Results in the home entertainment, children’s’ wear and everyday needs categories were particularly pleasing," said Julie Coates, general manager of Big W said in the statement.
In consumer electronics, the company’s Dick Smith Electronics and Tandy stores posted 6.5% growth for the second quarter on a comparable store basis, an increase on the 4.9% growth of the first quarter.
The company has restructured 33 stores in the Dick Smith chain, and said those stores had reported sales growth in excess of the overall average.
New store openings meant the overall sales growth in consumer electronics for the second quarter was 15.8%.
But the company warned the sales growth may not translate into increased profitability, saying that “it should be noted that the sales result has been delivered at a lower margin as we transition out of certain categories and experience both changes in sales mix and a highly competitive market".
The New Zealand supermarket business reported that second quarter comparable store sales rose up 3.0% in NZ dollar terms, matching the growth in the first quarter.
The figures fall short of the 5.8% food inflation for the half year, suggesting in sales in real terms are shrinking. But converted into Australian dollars, overall sales in the first half dropped 1.2%.
Petrol sales through the company’s own sites and those included as part of the Caltex alliance fell 3.7% in the second quarter on a comparable store basis. That was the impact of reduced price of petrol.
"Petrol sales for the half, including Woolworths/Caltex Alliance sites, increased by 15.0% to $3.1 billion.
“Petrol sales growth in the second quarter were flat reflecting reduced petrol prices. Petrol comparable sales increased 11.2% during the half, (2nd quarter declined 3.7%).
“Comparable volum
