Australia's Woolworths Q1 sales defy gloom
By Victoria Thieberger
MELBOURNE (Reuters) - First quarter sales at Woolworths Ltd (WOW.AX), Australia's largest supermarket chain, rose 9.6 percent as revenue from grocery held up, bucking slower consumer spending, and the company forecast good Christmas retail sales.
Woolworths continued to snatch market share from rival Coles, owned by Wesfarmers (WES.AX), where first-quarter sales rose just 2.6 percent as its new owners set about a five-year overhaul.
"That share seems to be coming from Coles, while Wesfarmers try and re-orient Coles' strategy," said Martin Duncan, analyst at Fortis Investment Partners.
"Food and liquor is going to hold up reasonably well in the current environment, although it just shows that if you don't get it right, you get into a mess like Coles has," he added.
Consumer spending in Australia has slowed sharply, but economists say there are signs confidence lifting after the central bank slashed official interest rates by 1 percentage point this month in response to the global financial crisis.
Woolworths' sales growth improved from 7.5 percent reported in the fourth quarter, boosted by store refurbishments that have expanded higher-margin fruit and vegetable sales.
Total sales for the 14 weeks to Oct. 5 rose to A$12.8 billion ($9.0 billion) from A$11.7 billion a year earlier.
Woolworths Chief Executive Michael Luscombe told Reuters he expects good sales for the critical Christmas period, helped by interest rate cuts and a government stimulus package.
"Right across all of our retailing businesses, we are certainly anticipating a good Christmas," Luscombe said in a telephone interview.
He said prospects of an improvement in the economy, helped by further interest rate cuts that economists are predicting, boded well for the new year.
"There are some good signs on the horizon for retailing and we are maintaining our positive view," he said.
For the year to June 2009, he reaffirmed forecasts that sales growth would be in the upper single digits.
For a graphic on Woolworths Q1 sales, click
STILL ON THE PROWL Continued...
