Woolies' profit increases 28%
Woolworths Ltd, Australia's biggest supermarket chain, beat forecasts with a 28 percent jump in first-half profit on strong food and liquor sales, and outlined plans to hold on to its top position.
Shares in Woolworths rose 5.7 percent after it said it will ramp up spending on store upgrades and announced plans for a credit card venture with British bank HSBC.
"They are trying to capitalize on a very strong position in the marketplace and that's the right strategy to adopt, they'd be silly to take maximum profits now and ignore the future," said White Funds Management portfolio manager Angus Gluskie.
Woolworths, which runs 770 supermarkets, outlined further refurbishment and supply chain improvements, while Wesfarmers Ltd begins a three-year overhaul of 740-store main rival Coles, which it acquired for A$20 billion ($18.5 billion) last November. Woolworths already has a tighter control on costs than Coles, enabling it to expand margins even as it offers discounts to lure customers.
Woolworths said net profit including one-offs for the six months to Dec 30 rose to A$891.3 million, above forecasts of A$864 million in a Reuters survey. Excluding one-offs, profit rose 25.7 percent.
Woolworths maintained its full-year net profit guidance of a 19-23 percent increase. Analysts had already forecast a 23 percent rise and had not expected an upgrade.
Woolworths said it would boost its capital expenditure this fiscal year to A$1.8 billion from A$1.3 billion to upgrade more supermarkets to the new "2010" format, including expanding the grocery sections. It plans to have 200 new-format stores by June.
Agencies
(China Daily 02/27/2008 page16)
