Woolworths surges ahead on strong Q3 performance

Australia's biggest supermarket chain, Woolworths, seems to have successfully bucked the trend in the economic downturn to surge ahead of other players with more than buoyant third quarter performance, much better that its eponymous British cousin (See: British retailer Woolworths starts closing-down sale after failing to find a buyer). The Australian retailer reported almost 6 per cent surge in sales in third-quarter sales to A$12.3 billion.  

Chief executive Michael Luscombe said the company had increased its market share in food and liquor to 32 per cent. Earnings before interest and tax were expected to grow at a faster pace than sales over the full year. Net profit after tax is expected to be in the 11-14 per cent range on a 52-week comparative basis.

Analysts attribute the performance to Australian food and liquor sales which with A$8.4 billion account for 10 per cent of growth in the third quarter.

According to Luscombe the tough economic conditions had impacted pubs and bistros, that had seen their sales of food and drink stay flat. Analysts say in the continuing economic downturn more people are staying home for their meals to save money.

Woolworths' Big W chain too saw sales rise 9 per cent in the third-quarter to A$ 958 million. Luscombe said at Big W, customers were buying home products mainly children's wear and women's clothes; men's clothing, though, remained weak.

He also said the downturn had triggered a trend in home cooking and home entertaining with wine sales especially of the premier, high end brands doing particularly well.

He added that cooking ingredients, condiments etc. had been strong and items like better cuts of meat and exotic fruits and vegetables holding up pretty well. He also said that bulk meat sales had done well though Woolworth pubs had been affected.

The general economic slowdown, has however not affected the company's two new Thomas Dux upmarket grocery stores which are performing well at two Sydney sites. The company reportedly has plans for a Melbourne launch of the format

According to Macquarie analysts, Woolworths accounted for 40 per cent of market share growth in Q4 last year and 44 per cent in this year's equivalent. They based their findings on Australian Bureau of Statistics data.

The analysts also said discount department store Big W had seen consumers switching to the new Dick Smith format, which is part of Woolworths' consumer electronics division. Its Australia-New Zealand consumer electronics sales surged 11 per cent to A$365 million.