2nd UPDATE: Woolworths Says FY10 Profit Could Be More Than A$2
Billion
(Adds detail throughout)
By Cynthia Koons
Of DOW JONES NEWSWIRES
SYDNEY -(Dow Jones)- Woolworths Ltd. (WOW.AU) reiterated Thursday that net
profit could break through the A$2 billion mark this financial year and said it
is still on the lookout for investment opportunities.
This comes just months after the company announced it was entering the home
improvement market through a joint venture with U.S.-based Lowe's Cos. (LOW).
Management plans to open its first store in 2011.
After the company's annual general meeting in Sydney, Chief Executive Michael
Luscombe expressed confidence to reporters that the company would grow sales
this holiday shopping season when compared to last.
Luscombe said the company hasn't been forced to increase discounting to drive
sales growth this holiday season either.
It's a bullish sign considering last year's sales were supported in part by
government stimulus money.
He wouldn't give guidance as to how retail conditions have been since the
first quarter ended Oct. 4, given the company will report second quarter sales
figures soon. "Things are going along quite nicely," be said. "We look forward
to having another good Christmas."
Chairman James Strong said at the meeting that management is continuing to
monitor its options "including new investments". He wouldn't elaborate on how
else the retailer might expand its offerings but did he say he was pleased with
how joint ventures have worked out for the group.
Woolworths' retail empire includes its supermarkets, Big W discount department
stores, Dick Smith electronics stores and petrol and liquor stores.
For fiscal 2010, the company reiterated earnings and sales guidance that it
provided in August.
Woolworths expects net profit to grow between 8% and 11% for fiscal 2010 and
maintained sales for 2010 should grow in the upper single digits, excluding
petrol sales. It expects earnings before interest and tax to continue to grow
faster than sales in fiscal 2010.
For fiscal 2009, Australia's largest retailer reported net profit of A$1.84
billion so the guidance indicates the group could earn more than A$2 billion in
the fiscal year to June 30.
While Luscombe said the year began "optimistically," it wasn't enough to lead
management to upgrade its guidance.
He warned rising interest rates could hurt the retailer but didn't seem to
think a possible December rate rise would cut into holiday sales too severely.
Woolworths is in the process of creating a big box hardware chain to compete
with Wesfarmers Ltd. unit Bunnings. Strong called the company's foray into the
A$24 billion home improvement sector in Australia a "good example" of a decision
that the group spent years researching.
Luscombe said the roll out is running a little ahead of schedule and
emphasized the venture will be profitable, although he wouldn't offer a
timetable as to when exactly it would begin contributing to earnings.
Attendees at the annual general meeting questioned Woolworths' involvement
with the gambling industry in Australia, given its ownership of pubs and slot
machines. Luscombe said the group has no plans to exit those businesses.
Strong said problem gambling is a "serious issue" and that the group will
comply with any changes in legislation on this issue. Australia's Productivity
Commission issued a draft report recently outlining potential changes to slot
machine rules in order to combat problem gambling.
-By Cynthia Koons, Dow Jones Newswires; 61-2-8272-4691; cynthia.koons@
dowjones.com
(END) Dow Jones Newswires
11-25-092359ET
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