On the face of it no sign of any management distraction in the 2005
year’s first quarter sales figures from Woolworths today from the
bitter battle with rival Coles Myer for control of Australian Leisure
It was a worry among shareholders and analysts that Roger Corbett and
his team would have been diverted from trying to rebuild sales in the
powerhouse supermarkets and liquor businesses, but the expansion of the
Woolies petrol offer, which is growing strongly, kicked in with good
But that growth seems to have come from the escalation in petrol prices
as much as higher sales. But we don’t know because the higher oil
prices weren’t broken out.
Check out the official announcement here.
It’s cleverly packaged to give the appearance of continuing upward
growth in same store sales, the most important measure in retailing.
It’s a sign of how well the continuing businesses are doing and strips
out the benefits of growth from store refurbishments and openings.
But you might note that Woolies doesn’t attempt to give petrol sales on
the same basis. Woolies has been in petrol for around eight years, much
longer than Coles and should be forced by the market to strip out the
same store figures, seeing as it’s a $3 billion a year business (based
on the first quarter sales of nearly $800 million)
The first quarter is 14 weeks, which is a little distorting, but that will work its way out of the equation over the year.
It is to be hoped that with a year of Coles Express under its belt,
Coles Myer also starts giving comparable sales figures for its petrol
business which is still bigger than Woolies and could reach above $4.2
billion for the current year in sales.
But if you look at the comparable announcement from Woolies a year ago here – you will some intriguing similarities.
Supermarket sales growth was faster in the first quarter of 2003, up
5.7%, compared to the 4.9% (not including petrol in both cases) in the
first 14 weeks of the current financial year. Same store sales growth
was similar at 2.8%.
Sales both gross and same store in both Big W were slower this
latest quarter than the same quarter of last year. BIG W top line
growth was 8.4% versus 11.8% a year ago and comparable sales were 4.3%
versus 5% a year ago.
Sales in Consumer Electronics (Dick Smith and Tandy) were faster this
latest quarter than a year ago, both on a top line basis and on a
comparable basis, pointing to the continued boom in home theatre, DVD’s
and other consumer products.
Sales in this business are a bit faster than Harvey Norman is
reporting, giving credence to reports that these operations are making
inroads into the Gerry Harvey area of strength. Harvey Norman said top
line growth in the first quarter was 12.8% and comparable store sales
growth was 6%. Clearly Dick Smith and Tandy are outperforming Gerry
Harvey’s chains(Harvey Norman and Domayne) which have much wider
Woolies consumer businesses grew sales in the latest quarter by 15.8% with comparable growth running at 14.4%.
So looking at the performance in the respective first quarters on a
comparative basis, you find not much change 12 months on from last year.
And remember 2004 saw Woolies sales rise in the current quarter, the
Christmas one and then eased dramatically over the next two quarters.
There was no recognition of that in the announcement a year ago.
Woolies still made the earnings guidance but for a while the market
lost faith with Roger when same store sales growth slumped as the Coles
petrol offer saw sales for the Melbourne-based giant accelerate,
especially in the Coles supermarkets business.
Woolies and Roger Corbett went to great lengths in today’s statement in
comparing the latest performance in the key supermarkets business, not
only with a year ago, but with the last quarter of 2004 financial year
when sales growth slowed to nothing more than inflation (1.5%) on a
He went to great pains to confirm the acceleration from that low
figure, and the 2.65% figure tossed out in late August for the first
seven weeks of the quarter. At 2.8% that indicates further growth in
supermarkets, but not as much as in the first seven weeks.
Overall sales growth was up 9.1% thanks to the 53% rise in petrol sales
and the better performance in supermarkets where sales rose a gross
Strip out the $276 million growth in petrol and the group’s sales rose by only $470 million or 6.6%.
It must be wondered that having complained of margin compression in
petrol in the 2004 profit announcement, if Woolies is getting better
returns from this business now volumes are growing.
But a little reminder, Roger(and so far there’s no sign of any move
from Coles) hasn’t stripped out the impact of higher oil prices on the
sales revenue in petrol.
Petrol sales might have risen 53%, but just how much of that is oil
price rises flowing through to the petrol market, wasn’t broken out.
Which is a pity! As all drivers know prices have escalated sharply in the past three months, up more than 20%.
That strong sales growth in petrol and in supermarkets(when the fuel
sales are added in) could be a bit of an illusion, which would not help
Woolies’ image once analysts start questioning the figure.
Especially with that ALH distraction still there to worry investors.