Woolworths has posted a 14.5 per cent fall in annual net profit as a result of its restructure of the Dick Smith electronics chain and says group sales at the start of the new financial year are steady.
The retail giant’s net profit for the year to June 24, 2012 was $1.82 billion, down from $2.12 billion in the prior 52-week period.
It incurred a $420 million restructure provision and impairment on Dick Smith, which has been downsized ahead of a potential sale and classified as a discontinued operation.
Excluding the Dick Smith provision and impairment, Woolworths’ net profit from continuing operations was $2.18 billion, up 3.6 per cent.
Sales revenue from continuing operations lifted by 4.8 per cent to $55.1 billion as sales rose in all of the company’s divisions: Australian food and liquor, petrol, Big W, hotels and New Zealand supermarkets.
Customer numbers and market share rose during the year.
“Despite some of the toughest retail conditions in many years I am satisfied that we have delivered both true value to our customers through lower prices and solid profit growth for our shareholders,” chief executive Grant O’Brien said.
Mr O’Brien said sales towards the end of fiscal 2012 had been stronger.
“Progress in this new year (fiscal 2013) has been similarly steady,” he said.
Woolworths has forecast its net profit from continuing operations to grow in the range of three per cent to six per cent over a normalised 52-week period in the 2012/13 financial year.
Woolworths’ fiscal 2013 year will have 53 weeks.
Mr O’Brien said he did not know how long it would take to sell the Dick Smith chain, which Woolworths considers to be a small, non-core business.
“I can only say that the sales process is ongoing, it is still in train,” he said.
Woolworths shares were 63 cents lower at $28.86 at 1415 AEST on Friday.
Morningstar analyst Peter Warnes said Woolworths’ net profit from continuing operations of $2.18 billion was slightly below expectations.
“This result just doesn’t have the punch the market expects from Woolworths,” he said.
“Margin performance in the engine room – Australian food and liquor – is just off the pace.”
Mr Warnes said Woolworths’ guidance for fiscal 2013 of three to six per cent profit growth was “nothing special”.
Woolworths said the Australian and New Zealand retail sectors would continue to experience challenging trading conditions as low consumer confidence impacts spending.
“The global uncertainty is not moving away in any time soon,” Mr O’Brien said.
He said that election years in Australia also tended to play on consumers’ minds.
Mr O’Brien said that in the subdued environment, customers were watching what they were buying and were attracted to “value” products, which he said was evident through the sales of Woolworths’ own brand in its supermarkets.
Given the fall in prices for fresh produce, customers were also buying more fresh food.
There had also been strong growth in sales of “affordable” clothing and footwear.
In the Australian food and liquor business in fiscal 2012, Woolworths was serving 19.5 million customers each week.
Mr O’Brien also said Woolworths was benefiting from mobile technology, with 1.8 million customers having downloaded a mobile app to use in Woolworths supermarkets, and 2.3 million customers across the group now using apps in their shopping.
