Woolworths has blamed the absence of federal government stimulus spending for the fall in sales growth and the actual falls in its Big W and consumer electronics businesses in the March quarter.
So dramatic was the impact of the stimulus’ absence that the retailer has slashed its 2010 sales growth forecasts in half.
Woolies halved its sales guidance for the 2010 financial year to a range of 3% to 6% growth, from its previous "upper single digits" (say 8% or 9%).
Other retailers such as Harvey Norman and Coles reported slowing third quarter sales growth, thanks to the absence of the stimulus and a more cautious approach from consumers.
The Woolies slowdown makes for an interesting set of retail sales data from the Statistics Bureau on Thursday.
Retail sales fell in February and there are suggestions there could be another weak month, although some economists are saying there could be a rise.
Profit is still forecast to rise by 8% to 11% for the year, but if the current 4th quarter produces another underwhelming figure, then that profit growth forecast might be in danger.
And there’s every chance it will with the government stimulus spending playing a big part in boosting fourth quarter sales a year ago.
Overall, Woolworths increased third quarter sales by 4.7% across the group.
Sales for the 13 weeks to April 4 including petrol were $12.9 billion, compared with $12.3 billion a year earlier.
That was down from the 5.9% in the third quarter of last year.
A different timing for Easter was a complication, but could disguise the slowdown, or the fact that rival Coles did better in the quarter.
The company’s heartland, the Australian food and liquor division (the company’s biggest earnings generator) reported sales of $8.75 billion, up 3.8% on a top line basis, just less than the 3.9% reported by Coles.
But the best measure is retail performance is same store or comparable store sales growth and there Woolies growth was 2% against Coles 3.8%.
Woolies said there was no food price inflation in the quarter, as did Coles, so that evened things out across both retail giants.
The Big W general merchandise chain and the Dick Smith Australian consumer electronics business, two of the big beneficiaries of last year’s stimulus spending, saw same store sales drop 3.7% and 3.8% respectively.
For both businesses it was the second successive fall in quarterly same store sales, having failed to lift sales in the lucrative Christmas period in the second quarter.
In contrast Coles Kmart business bounced back in the third quarter with a 4% rise in top like and same store sales as the division is revamped and its marketing improved. Target had flat top line sales, while same store sales fell by around 2%.
Woolies shares rose 19c to $27.10, after falling by around 50c in early trading after the sales report was released.
