Woolworths profits slide

ON YOUR way home tonight, Woolworths would very much like you to stop by its stores and spend some money. It’s having a bad day.

Woolworths Supermarkets Ahead Of Annual Results

WOOLWORTHS has downgraded its full year guidance and announced plans to step up investment in its core supermarkets business after falling further behind arch rival Coles.

The supermarket giant had previously forecast full year profit growth of between four and seven per cent but now says growth is likely to be at the lower end of analysts forecasts for a profit increase of between 1.8 per cent and 6.6 per cent.

Woolworths suffered a 3.1 per cent slide in its first half profit to $1.28 billion due to costs associated with its efforts to turnaround Big W, but beat market expectations by lifting its underlying net profit to $1.38 billion.

Chief executive Grant O’Brien said the company was stepping back from its earlier guidance to allow itself to make investments for the longer term in the supermarkets business.

“A strategic review of Australian supermarkets performance confirmed the considerable opportunities for performance improvement, future growth and the need for continued disciplined investment in value for customers to maintain our market leadership and drive sales momentum,” he said.

The ‘Cheap Cheap’ campaign isn’t really working.

“While there is a clear path to meet the guidance provided of net profit after tax of four to seven per cent in FY15, we have decided to provide ourselves with additional flexibility to make the necessary investments to deliver on our long term plans and the associated shareholder value creation,” The move comes after Woolworths’ supermarkets division reported a disappointing 1.7 per cent increase in same store sales during the first half of the 2014/15 financial year, which compares to 4.2 per cent comparable sales growth for Coles.

Woolworths said sales had been improving in October and November but were subdued in December and January and admitted it should have spent more on in store service over Christmas.

“While our Cheap Cheap campaign has been well received by customers, our promotional programs were not as successful as we expected and we did not see the improvement in price perception we anticipated during the quarter,” the company said in a statement. “We also should have invested more into in-store service during the critical Christmas trading period.” Meanwhile, the head of Woolworths’ Australian Food and Liquor Division, Tjeerd Jegen has stepped down, to be replaced by the current head of the company’s liquor business Brad Banducci. Woolworths lifted its fully franked interim dividend two cents to 67 cents per share.