MELBOURNE—Australia's biggest retailer Woolworths Ltd has maintained its full year sales growth forecast after higher food prices and growing market share delivered strong third quarter sales.
The grocery giant modestly kept to its forecast for sales growth of up to 10 per cent this financial year, after booking a 10.2 per cent jump in the third quarter sales today.
The result augurs well for Woolworths to hit its net profit forecast, given in February, of between 19 per cent and 23 per cent growth in 2007/08.
The retailer does not update its profit outlook at quarterly results announcements.
Its sales performance confirmed analysts' expectations that Woolworths would continue to snatch custom from rival Coles, which is undergoing a major rejig under new owner, Wesfarmers Ltd.
But in the midst of an inquiry into grocery prices by the competition watchdog, Woolworths boss Michael Luscombe sought to allay claims the pair's domination of the supermarket sector was itself contributing to higher prices.
Mr Luscombe dismissed the "selective reporting" of some of the claims in submissions to the Australian Competition and Consumer Commission.
"There's nothing there that has not indicated that competition is alive and well in Australia," he said.
"Consumers are voting. We have an election everyday.
"We actually put our program out there for them to vote with their wallets every day. Clearly, in the last quarter we've won the election."
Woolworths, which also runs general merchandiser Big W and Dick Smith Electronics, recorded $11.639 billion in total sales, compared to $10.559 billion in the previous corresponding quarter.
The food and liquor division, which takes in 777 supermarkets, delivered the bulk of the result, with sales rising 9.3 per cent to $7.6 billion.
Food and liquor like-for-like sales - the figure analysts focus on - increased 6.7 per cent, adjusted for an earlier Easter.
Commsec retail analyst Grant Saligari said it was "astounding" Woolworths had been able to sustain like-for-like sales growth above six per cent over six consecutive quarters.
"They've got better supermarkets and they're generally in stock," he said.
"Operationally, they're just performing a lot better. Clearly the lead (over rival Coles) extends."
Woolworths and Coles control between 74 per cent and 80 per cent of the national market, according to two 2008 retail surveys.
Mr Luscombe did not say the extent to which Woolworths had increased market share.
"It's certainly not decelerating. It's continued its' strong momentum."
Significantly, inflation in the retailer's supermarkets and liquor stores rose 4.5 per cent in the quarter, well up on the two per cent from the first half.
Woolworths also acknowledged what many shoppers know first hand - increased price pressure on certain products and the end of price deflation in the produce sector.
But Mr Luscombe rejected suggestions higher prices, rather than volume, were driving the sales result.
"Our basket size and our customer counts have continued to increase," he said.
He said inflation had accelerated during the quarter, hitting bread and milk prices the hardest.
"But whether it's going to go up or go down, it's far too early to tell," he said.
He was optimistic about Woolworths' ability to ride out the current downturn in consumer sentiment.
"It's those that offer the best deal that will continue to prosper even though times are tough," he said.
Quarterly sales from Woolworths' New Zealand supermarkets rose a statutory 4.2 per cent to $1.1 billion.
Petrol sales, including Woolworths/Caltex Alliance sites, rose 19.7 per cent to $1.4 billion, reflecting higher petrol prices.
BIG W sales lifted 13.1 per cent to $879 million, continuing the positive momentum for the first half, and consumer electronics sales rose 13.7 per cent to $356 million.
Sales from Woolworths hotels division, which is expected to benefit from the Victorian government's decision to end a duopoly on pokies licences, increased 4.4 per cent to $263 million.
Woolworths shares were unchanged at $28.70.
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