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
Luscombe also suggested Woolworths remained interested in New Zealand's largest retailer, The Warehouse (WHS.NZ), despite withdrawing an appeal last week on technical grounds against a court ruling that prevented a takeover bid.
"There's no great rush there," Luscombe said, adding the New Zealand recession has "certainly diminished the value of The Warehouse" to a potential buyer.
Shares in Woolworths were up 0.8 percent at A$28.24 at 0330 GMT in a broader market .AXJO up 2.9 percent. The stock rose 5 percent on Monday.
Woolworths' same-store sales in Australian food and liquor rose 6.0 percent, up from 4.9 percent in the fourth quarter and compared with just 1.3 percent at Coles in the first quarter.
Analysts at Citi had forecast total sales up 8.7 percent and same-store food and liquor for Australia to rise 5.7 percent.
Even units that depend on discretionary spending -- discounter Big W and Dick Smith Electronics -- showed stronger sales than in the prior quarter. Luscombe told a briefing sales in October in its non-food units had started "very positively."
In contrast, electronics and furniture retailer Harvey Norman Holdings Ltd (HVN.AX) posted a deteriorating sales performance on Tuesday, as sales in the latest four weeks slumped 5.8 percent.
Woolworths said comparable store sales at Big W rose 4.4 percent in the first quarter, up from 2.6 percent in the fourth quarter. In consumer electronics, comparable sales rose 4.9 percent, an improvement from 3.8 percent in the prior year.
($1=A$1.42)
(Editing by Jonathan Standing and Anshuman Daga)
