Woolworths boss Grant O’Brien has warned that a tough federal budget and unemployment woes could hurt consumer sentiment and undermine the retail giant’s hopes of delivering a strong full year profit
The retailer on Friday announced it was now targeting a five to seven per cent rise in its full year profit, which is slightly above its previous forecast.
It’s first half result shows it is on track for that, with underlying net profit up six per cent to $1.32 billion for the six months to December 31.
Mr O’Brien said Woolworths needed strong consumer confidence to deliver the result it seeks.
But, he said, expected federal budget cuts as well as problems with Qantas and the auto sector could hurt sentiment.
“For us to deliver a big number this year, consumer sentiment will have to be in a very strong place,” he said.
“But there are some things we’ve just got to be realistic about looking forward, there’s a budget coming our way and there’s also quite a bit of negative noise around jobs.”
Mr O’Brien said consumer sentiment was less of a concern for the company’s food and liquor division but impacted on the more discretionary parts of its business.
Woolworths’ solid first half result was again underpinned by its core Australian supermarkets business, with food and liquor earnings up nearly seven per cent.
But the rollout of its home improvement business Masters continued to drag on the company with a $72 million loss for the half.
However, sales from the business, were up 49.4 per cent and the company reiterated its forecast for Masters to break even during the 2016 financial year.
Earnings from Big W, meanwhile, were down seven per cent amid challenging conditions and price deflation but the company’s hotels business performed better, with earnings up 16.4 per cent thanks to reduced costs and higher margins.
Woolworths shares were 45 cents, or 1.24 per cent, lower at $35.97 at 1323 AEST.