By Shivangi Lahiri and Byron Kaye
Feb 25 (Reuters) – Top Australian grocer Woolworths reported forecast-beating first-half profit and raised guidance for the full year as cost-conscious shoppers responded to price cuts, putting its shares on track for their biggest advance in decades.
The trading update for the six months through December marked a turnaround for the company, which along with No. 2 rival Coles supplies two-thirds of Australian groceries. After analysts said Woolworths was driving customers away by charging too much during a cost-of-living crisis, the retailer has been cutting operating costs and charging customers less.
Underlying net profit rose 16% to A$859 million for the 27-week period ended January 4, beating the Visible Alpha consensus estimate of A$813.5 million. The underlying figure excluded one-off items like the impact of industrial action and reimbursing employees affected by an underpayment claim.
Woolworths said Australian food sales, its biggest earner, rose 5.8% in the first seven weeks of the second half, ahead of the Visible Alpha consensus forecast of 3.4%. It said full-year earnings growth appeared likely to be near the top of a previously provided range of “mid-to-high single digits”.
“It has been a very promotionally intense period,” said CEO Amanda Bardwell on a call with analysts.
“Customers want value but they also want reliable value,” she added.
Woolworths shares were last up more than 11%, putting them on course for their biggest intraday gain since 1997 as analysts upgraded their forecasts for the A$38 billion company.
“Given year-to-date food sales growth … this revised guidance still appears conservative,” Ord Minnett analysts said in a client note.
The company’s 3.6% rise in Australian food sales in the July-to-December period was “the strongest number we have seen in some time from WOW”, said RBC Capital Markets analyst Michael Toner.
With Coles reporting first-half results on Friday, “the market will get a much clearer picture of how the grocery wars are actually playing out between this duopoly”, said Josh Gilbert, a market analyst at eToro.
Woolworths declared an interim dividend of 45 Australian cents per share, compared with 39 Australian cents a year earlier.
($1 = 1.4166 Australian dollars)
(Reporting by Byron Kaye in Sydney and Shivangi Lahiri and Rajasik Mukherjee in Bengaluru; Editing by Tasim Zahid, Jonathan Ananda, Sherry Jacob-Phillips and Kevin Buckland)
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