Woolies warns of profit plunge

WOOLWORTHS shares have been smashed after the supermarket warned its first half profit could plunge by up to 35 per cent on weak grocery sales.

Profit plunge looming for Woolworths

WOOLWORTHS is warning its first half profit could plunge by up to 35 per cent after first quarter food and liquor sales rose by just 0.4 per cent to $11.1 billion.

Chairman Gordon Cairns said the impact of previously announced investments would lower margins at its supermarkets and drag down first half net profit by between 28 and 35 per cent.

During the 14 weeks to October 4, total sales fell 2.5 per cent to $15.7 billion and comparable food and liquor sales at the group’s Australian supermarkets fell one per cent.

Petrol sales declined 27.9 per cent to $1.3 billion following a drop in global oil prices and the transition of some sites to Caltex, while general merchandise sales dominated by the Big W chain dropped 7.9 per cent to $974 million.

Home improvement sales were up 20.3 per cent on the previous year to $568 million. Masters sales were up 23.5 per cent to $294 million, while Home Timber and Hardware sales increased 17.1 per cent to $274 million.

“The Board and management are focused on making the best long-term decisions across all our businesses,” Mr Cairns said in a statement.

“There will be short-term consequences, but we are confident that the decisions we are taking are necessary to realise the immense potential of the Group for our shareholders.”

Shares in Woolworths plunged by 9 per cent to hit a four-week low of $24.92 on the news.

Rival Coles’ food and liquor sales rose 4.7 per cent to $7.6 billion in the three months to the end of September, which managing director John Durkan attributed to a price decline of 1.3 per cent.