As expected, the country’s biggest retailer, Woolworths, said goodbye to CEO Roger Corbett with a billion dollar profit, the biggest ever earned by a local retailer.

The company said earnings after tax rose more than 24% in the year to June to $1.01 billion. Somewhat parsimoniously shareholders will only receive a 15.7% lift in total dividends for the year to 59c a share from 51c.

That profit was earned on gross margins which now account for 25c in every dollar of sales at the retail giant.

Woolies’ gross profit: that is after buying and the cost of goods sold (COGS) but before tax, administration costs and interest, amounted to $9.44 billion, up from the $7.802 billion earned in 2005.

With sales rising to more than $37 billion in the year from just over $31 billion, the gross profit margin for the company was 25c in the dollar, a small rise from the 4.88c in the dollar reported last year.

That will rise this year as cost cuts and other changes click in at the New Zealand supermarkets acquired in the Foodland deal during the year and in the Taverner hotels also acquired during the year.

The net retail margin rose to 4.45c in the dollar compared to 4.16c a year ago. And the company expects to grow earnings by between 16 and 21% in the coming year, putting net earnings up around $1.2 billion.

That’s enough to make Coles management and board hang their collective heads in shame at the missed opportunities since 2001. Woolies is simply showing Coles what it should have been doing: all the talk by Solly Lew and Peter Bartels about the current “ownership” question at Coles is all hot air.

Both had their chances to fix up Coles and both fluffed it. It has taken Roger Corbett and the Woolies board to show Coles just how to go about boosting profits, sales and returns to shareholders (and expanding jobs).

Of course it hasn’t been without controversy, most notably, the expansion into poker machines and hotels, the hard-nosed dealings with suppliers, including farmers, and a hard line approach to competition.

Peter Fray

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Peter Fray
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