Woolies Solid, HVN Sales Still Falling

Sydney, Oct 22, 2008 (ABN Newswire) - Two different sales updates yesterday from two of our largest retailers, Woolworths, and Harvey Norman.

Woolworths reported a solid lift in first quarter sales on a topline and comparable store basis, and maintained its sales growth guidance for the full year.

But there were signs of a noticeable slowdown in the September quarter of 2008, compared with the same quarter of 2007, especially in same store sales growth from food and liquor outlets and Big W stores.

Harvey Norman reported that the sales slump in its Australian stories accelerated in the four weeks to last Sunday, October 19.

Woolies reported yesterday total sales growth of 9.6% to $12.82 billion for the 14 weeks ended October 5, with sales from continuing operations rising 9.7% to $12.78 billion. 

That compares with an 8.7% rise in sales for the group from continuing operations in the first quarter of 2007.

The performance in the company's heartland, the Australian food and liquor business was just as solid, with topline sales up 8.3% and same store (comparable store sales, which are stores open a year or more) up 6.0%. But that was slower than the same quarter of 2007 when topline sales rose 8.7% and same store sales were up a strong 7.6%.

In addition Woolies said food inflation in the latest first quarter was 3.2% (2.9% in the June quarter of 2008), but this was significantly higher than the 'less than 2%' figure given for the September quarter of 2007-08.

"This result represents the eighth consecutive quarter of positive comparable sales and reflects the continued customer acceptance of BIG Ws everyday low price position," the company said.

Woolworths chief executive Michael Luscombe said the company had made a good start to fiscal 2009.

"We are mindful that discretionary spending continues to be influenced by macroeconomic factors and will be influenced by the recent events in global financial markets," he said in a statement.

"Subject to the uncertainty these factors create, we maintain our sales outlook for the full year where we expect sales from continuing operations to grow in the upper single digits."

The retailer said new initiatives were well received by its customers, including the rollout of its 2010c store format and its Everyday Rewards program.

Australian and New Zealand consumer electronics grew by 6.1% on a top line basis in the September quarter, compared with 10.5% in the same quarter of 2007. Same store sales in the latest quarter averaged 4.9% growth, against 6.1%.

"Consumer Electronics has continued to enjoy solid growth with sales for the quarter increasing 6.1 per cent," Woolworths said.

Petrol dollar sales for the quarter, including Woolworths/Caltex Alliance sites, increased 30.4% with "average fuel sell prices well above the prior year". The volume of petrol sales rose 1.7%, which was fractionally down on the 4th quarter of 2008 financial year.

BIG W sales grew by 10.7% during the quarter and 4.4% on a same store basis (2.6% in the 4th quarter of 2008 but sharply down from the 9.6% same store sales growth in the same quarter of 2007).

New Zealand supermarkets achieved sales of $1 billion for the quarter, an increase of 3.0% on a same store basis, 3.1% in New Zealand dollar terms but it was down 5.6% in Australian dollar terms.

Woolies didn't provide strict comparisons with the September 2007 sales performance for each division which it did last year. It did for the overall sales figures. How very strange.

Woolies shares rose 40c to $28.40 yesterday at one stage before easing to finish up just 7c at $28.07.

Harvey Norman is the country's leading furniture, consumer entertainment and IT retailer and it reported a worsening in its sales in the week to Sunday.

Last week it reported a drop in same store sales of 4.7% for the four weeks to October 12.

Yesterday it said that in the four weeks to October 19, same store (or like-for-like as Harvey Norman describes it) sales had slumped 5.8%.

"Retail margins continue to be under pressure," chairman Gerry Harvey said in a statement.

The company says it had franchise stores in every state and big town in Australia and that makes it a good barometer for the way people are feeling, and more importantly, spending.

For this reason, Harvey Norman has undertaken to update these figures for the next three weeks.

Harvey Norman shares rose 5c yesterday to close at $2.77 on a day when the overall market was up nearly 4%.

 

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