It was a standard first quarter sales update from major retailer Woolworths (WOW) without a concern for investors, judging by the reaction in the share price.
That’s despite a sales performance that was clearly not as good as that reported for its rival, Wesfarmers (WES) and its chains, earlier in October.
Woolies rose to $34.90, a rise of 5c as investors ignored the comparison, for the moment. The shares rose as high as $35.22 during the day.
The report revealed a modest 3% rise in topline sales to $15.68 billion for the three months to October 6 with reasonable performances from supermarkets (and a big boost from higher petrol prices, which is probably the only query).
The group’s Big W general department store chain was weak, compared to its direct competitor – the Kmart chain of Wesfarmers. But it did do better than Wesfarmer’s other chain, the troubled Target operation.
Sales were up 6.4% across the company’s Australian and Zealand supermarkets and petrol outlets, which collectively had sales of more than $13.8 billion.
The Australian food and liquor business boosted sales for the quarter to $10.6 billion, an increase of $0.5 billion or 4.5% on the previous year.
Comparable store sales for the quarter increased 2.5% with strong unit growth, and Woolies management said there was growth "particularly in fresh foods, and customer growth offsetting higher deflation in produce".
The company’s New Zealand Supermarkets’ sales for the quarter were NZ$1.5 billion, an increase of 1.8% on the previous year (13.8% increase in $A).
But comparable sales for the quarter fell 0.7%, "impacted by low price inflation and a reduction in sales of infant milk formula resulting from the Fonterra product recall," Woolies said yesterday.
"Excluding the impact of infant milk formula, comparable sales for the quarter were flat when compared with last year," Woolies explained.
WOW vs WES YTD – Woolies Q1 sales report OK, but WES did better
Woolworth’s petrol division lifted sales 12.6% during the quarter, thanks to the surge in petrol prices boosted by a combination of the weaker dollar and higher world oil prices. Petrol sales for the quarter, including Woolworths/Caltex alliance sites, were $1.9 billion.
The company said its average unleaded fuel selling prices for the quarter were 150.9c per litre (Quarter 2012-13: 139.6 cpl). Comparable sales (dollars) increased 10.2% thanks to the higher price.
Petrol volumes increased 3.5% for the quarter and comparable volumes increased 1.9%.
"Volume growth has been driven by forecourt improvements for the benefit of our customers including increased access to all types of fuel as well as our focus on targeted fuel promotions which provide customers with leading offers within our supermarkets. Strong growth in customer numbers has been a highlight for the quarter.
"Total merchandise sales increased 9.5% and comparable merchandise sales increased 6.2% for the quarter, driven by new product lines as part of our expanded convenience offer, improved ranging and more effective promotional activity," the company said.
But the Big W operation saw a weak result. Sales for the quarter were $1.1 billion, down 3.6% on the previous year.
"Sales growth for the quarter was impacted by differences in the timing of the annual Toy Sale relative to the reporting date, with it being launched in the 53 rd week of 2012-13. Excluding the timing impact of the Toy Sale, sales growth was positive for the quarter," Woolies explained.
Comparable store sales decreased 3.2% for the quarter. "Sales have been impacted by price deflation of 4.1% for the quarter (compared with the 4.1% price deflation of 4.2%), particularly in Home Entertainment," the company said.
Hotel sales for the quarter were $403 million, an increase of 6.3% on the previous year. Comparable sales increased 3.7% for the quarter.
And the Master’s home improvement business sales for the quarter were $391 million, up 28.2% on the previous year. This included sales from the Danks hardware chain of $209 million, up 12.4% on the previous year and Masters sales of $182 million, up 53% on the previous year.
WOW Full First Quarter Results – FY2014
So how did Woolies stack up against Coles? Well, sales performance was weaker across the board, but still solid. That’s the key takeaway from the comparison between the two quarterly results.
Here’s how we reported Coles performance earlier this month:
The Coles supermarket chain posted a 4.9% rise in topline sales to $8.9 billion in the three months ended September. Same store sales rose a very solid 3.4%, which was significantly faster than the CPI for the same period of 1.2%.
Sales from the Bunnings DIY chain jumped by a very strong 10.4% to $1.99 billion, with comparable store sales up a sharp 7.1% in the quarter and sales at the Officeworks chain were up 3% to $373 million. No comparable sales figures were given for Officeworks
The Kmart department store chain continued its strong performance of the past four years with another solid quarter. Sales rose 4.6% in the quarter to $970 million and 2% on a comparable store basis.
But it was a different story at Target where, in a planned campaign to liquidate overstocks, sales fell 6.1% to $789 million and 5.2% on a comparable store basis.
Wesfarmers said total sales for the quarter in its Coles Express convenience chain including fuel, were $2 billion, up 6.5% on the previous corresponding period.
