Masters the big climber as Woolworths releases half-yearly sales results

Woolworths Limited has released its results for the first half of FY2014, posting a strong performance across its group of retailers and a 6 per cent increase in overall sales, up to $31.8 billion (1H13: $30.0 billion).

Growth was driven in part by Woolworths’ supermarket division; Australian food and liquor sales by almost $1 billion (4.8 per cent) to $21.5 billion, while the company’s petrol business and New Zealand supermarkets also fared well, seeing sales increases of 8.0 per cent (up to $3.7 billion) and 15.2 per cent (up to AUD $2.7 billion) respectively.

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One of the big jumps was the increase in Masters’ sales figures. The hardware and home improvement retailer added 7 new stores to its existing network of 31 in the first half of the financial year, but increased sales by 49.4 per cent year on year, up to $393 million.

Sales growth for the total home improvement business was curtailed by Woolworths’ established hardware business, Home Timber and Hardware. Sales for this retailer were up 7.8 per cent year on year, climbing to $403 million, giving the overall home improvement business a more moderate growth figure of 25 per cent (up to $796 million).

Discussing Masters, Woolworths’ sales release statement read:

Our business remains in its development phase, with our stores having traded, on average, for 15 months. Approximately half of the stores opened over the last 12 months are in regional and future growth areas which will take longer to mature and will have sales below the long term group average. Increasing sales per store remains a key focus and driver of our path to profitability.

Woolworths also announced the appointment of Matt Tyson to the role of managing director of the Home Improvement business, filling the position formerly held by Don Stallings.

In Woolworths’ ‘General Merchandise’ business (which includes Big W and Ezibuy) sales stayed relatively unchanged, growing by $5 million to $2.45 billion (up 0.2 per cent). According to Woolworths, the figure was affected by timing of Big W’s annual toy sale; excluding this factor, sales were up 2.0 per cent.

According to Big W acting director Karen Bozic, sales were also impacted by “strong competition, ongoing price deflation…and increased promotional activity.”

Commenting on the specific aspects of Woolworths’ overall performance, CEO Grant O’Brien spoke about the company’s strategic priorities:

This first half sales result was a strong and positive reflection of the four strategic priorities that have shaped our focus over the last two years. The first priority, and the central theme of our focus, has been to ‘extend our leadership in Food and Liquor’. The improvement in the growth rates for our Food and Liquor business demonstrates the transformation that is underway.

As previously communicated we are focused on transforming Big W for the future, an element of our second strategic priority to ‘act on our portfolio to maximise shareholder value’. We are aligning our focus to categories that are core to our customers to ensure this business is well placed to drive profitable growth in the future. We anticipate this will continue to impact short term sales.

We have made significant progress on the third of our strategic priorities, ‘maintaining our track record of building new growth businesses’ with the half featuring strong growth in our multi-option business and progress in building our home improvement offer. Online sales exceeded $1 billion for calendar 2013, ahead of our FY14 target.

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