Price war hits Woolies comparable sales
Market watch top headlines
SYDNEY, Jan 31 AAP
January 31 2013, 5:49PM
Grocery giant Woolworths may have lured more shoppers to its supermarkets during the first half but its ongoing price war with rival Coles has taken a toll on sales.
Woolworths' total sales for the 27 weeks to December 30 were up 3.2 per cent on the previous corresponding period.
Its Australian food and liquor division sales rose 4.7 per cent to $20.48 billion, compared to Coles which were also up 4.7 per cent to $18.3 billion for the first half.
However, Woolworths' comparable food and liquor sales, which exclude the impact of new and closed stores, increased by just 2.4 per cent compared to Coles' 3.8 per cent jump.
The comparable result came at the lower end of analysts' expectations of 2.3-3.5 per cent sales growth.
Woolworths' shares dropped 41 cents, or 1.3 per cent, to $31.24.
"Woolworths actually has quite an aggressive store roll out plan and one of things we're watching is whether they are cannibalising their own sales," Bell Direct analyst Julia Lee said.
Woolworths and Coles, which reported its latest sales results on Wednesday, have been slashing prices in an attempt to boost sales.
While Woolworths' chief executive Grant O'Brien insists the two retail giants are not at war, the price cuts did help his supermarket chain increase market share during the half.
But the battle with Coles also continued to have an effect on average prices, which fell 2.8 per cent during the first half.
Mr O'Brien mainly attributed Woolworths' increase in customer numbers, basket size and items sold during the first half to a stronger focus on targeted promotional campaigns with information gained through loyalty cards.
"We have made a decision and used the opportunity during the second quarter to do more targeted customer offers and use this customer data," he said.
Woolworths also opened 17 supermarkets across Australia during the half year bringing the total to 887.
Petrol sales fell 1.2 per cent to $3.4 billion as it focused on targeted fuel offers compared to Coles' more aggressive ongoing fuel discounts.
Elsewhere, Woolworths' discount department store Big W made $2.4 billion in sales in the first half, up 3.6 per cent.
But while comparable sales increased 0.7 per cent during the half, they were down 1.7 per cent in the second quarter.
Woolworths attributed the drop to Big W having cut prices by 4.9 per cents, and a reduction in promotions.
Sales were also impacted by falls in the consumer electronics division.
Woolworths' new home improvement chain Masters increased its sales by 54.7 per cent to $637 million over the half mainly due to the roll out of 10 new stores.
By Kylie Williams