Australia's Woolworths First-Half Profit Jumps 28%


Woolworths, Australia's largest supermarket chain, beat forecasts with a 28.1 percent jump in first-half profit on strong growth in food and liquor sales, and outlined plans to ramp up investment in its stores.

Woolworths said net profit for the six months to Dec. 30 rose to A$891.3 million (US$825.3 million) from A$695.6 million. That was above forecasts of A$864 million in a Reuters survey of eight analysts.

Woolworths H1 Profit Jumps

Woolworths maintained its full-year net profit guidance of a 19-23 percent increase. Analysts already expect a 23 percent rise in net profit in the year to June 2008.

Woolworths outlined refurbishment and supply chain improvements to keep its 770 supermarkets in a dominant position, while conglomerate Wesfarmers begins a three-year overhaul of 740-store main rival Coles, which it acquired for A$20 billion last November.

Woolworths said it would increase its capital expenditure this fiscal year to A$1.8 billion from A$1.3 billion to speed up the upgrade of supermarkets to the new "2010" format.

It is also expanding its home brand product range, which carries higher margins, and organic and allergen-free ranges.

Woolworths said it is on track to launch its own credit card early in the new fiscal year that begins in July.

In the first half, core food and liquor same-store sales rose 6.8 percent, up from 5.7 percent growth a year earlier, while inflation halved to 2 percent from 4 percent.

Analysts are watching the performance at Woolworths' Dick Smith Electronics chain and Big W discount retail stores to gauge any slowdown in discretionary spending.

In the first half, earnings at Big W rose 20.1 percent helped by store revamps, while consumer electronics including Dick Smith rose 5.9 percent.

Woolworths shares have fallen 15 percent this year, as retail shares have been sold heavily in a market worried about a consumer slowdown. That compares with 11.5 percent for the broader market.