The ruthless Woolworths machine has today shown up its inferior fellow duopolist Coles in a major way with a surprisingly good result. Net profit after tax for the December half soared 28% to a record $695.6 million and the guidance for 2007-08 was increased from the range of 16-20% to 20-24%.

Having made a net profit of $1.014 billion in 2005-06, this means a record of $1.237 billion is in the frame for the full year, when Coles will be struggling to make its forecast of $787 million.

Woolies shares soared 50c to a record $26.70 this morning, capitalising the retailer at almost $32 billion, even though its balance sheet shows net assets of just $5.3 billion. That’s called exploiting market power!

News Ltd’s Terry McCrann was absolutely right today when he opined that Woolies should not be allowed to buy one store in the Coles breakup. The ridiculous power and efficiency of Woolworths was once again demonstrated by the fact it had negative inventory of $750 million as at 31 December.

Having pushed payment terms out to 35 days (Coles is a laggard at 28 days but the barbarians will soon fix that), Woolworths owed its supplies $3.792 billion as the new year ticked over but only had stock worth $3.047 billion on its shelves and through its warehouses.

That’s right – Woolies has such market power that it’s a virtual retailer with $750 million in negative inventory. The latest attack on supplies is aggressively to roll out the Woolworths home brand which is already Australia’s biggest seller and will continue to grow exponentially.

Whilst the market was agog at the riches pouring out of Woolworths, the company continues to fudge the numbers on its sin divisions. We know Woolies has 1025 liquor outlets but these are rolled in with the supermarkets division.

Similarly, hotels are reported separately from liquor/supermarket but there’s no breakout of gaming revenue from Australia’s biggest owner and operator of poker machines.

The hotels division has just gone past Big W as EBIT soared more than 30% to $109.5 million for the half, on sales of $539.5 million. Big W managed EBIT of just $107.6 million on sales of $1.93 billion.

There’s no sign of the Woolies machine losing momentum under new CEO Michael Luscombe. Full years sales are still expected to grow by 8-12% as the retailing behemoth continues to take market share from its smaller rivals and bed down acquisitions.

When will the regulators and politicians decide that enough is enough? Having seen the rapidly acquired Woolies dominance in petrol, pokies and liquor, is it any wonder the pharmacists are nervous?