by: John Durie
From: The Australian
October 27, 2011 11:14AM
THE woes at Woolworths continued today as dismal first-quarter sales numbers underlined the loss momentum to smaller rival Coles.
Same-store comparisons at the supermarket chain showed sales growth of 1.9 per cent, well behind Coles at 5.2 per cent and coming against a low hurdle of 2 per cent growth for the same period last year.
The difference between Woolies and Coles was underlined by comparable fuel sales, with Coles up 5.2 per cent in the quarter against just 0.1 per cent for Woolies.
Fuel sales are driven in part by voucher redemptions, which suggests supermarket volumes for Coles are growing much faster.
Milk sales at Coles are also running three times as fast in volume terms.
Same-store sales at Big W were down 4.2 per cent, the same as for Target, underlining the weak consumer-spending climate.
Consumer electronics continued to slide, with same-store sales down 0.5 per cent.
In all, the sales figures show that new boss Grant Oâ€™Brien has plenty of issues before him.
His liquor business is streets ahead of Coles, yet the momentum of food and liquor sales is going backwards, which must mean dismal grocery sales.
Analysts are calling for the sale of Dick Smith, saying it is showing no signs of recovery, and coupled to the big bet on hardware on the table, the new boss has his hands full.
Next week, Oâ€™Brien will hold his first strategy session, which will be watched closely for some signs of change in past managementâ€™s policy of maintaining high supermarket margins, cutting into sales growth with the aim of maintaining earnings growth.
This column asked three analysts for a short comment each on what they were looking for next week.
Merrill Lynchâ€™s David Errington is looking for ways in which Woolies can re-energise cost-savings, control capital expenditure and handle the new regulations on gaming, as well as a renewed focus on return on capital rather than earnings per share growth.
Nomuraâ€™s David Cooke also raised some concerns over Woolies’ material reliance on regulated products like gaming, alcohol and tobacco. He too is looking for more focus on return on capital and suggests Dick Smith has outlived its usefulness.
Cooke would prefer more capital management focus, with more use of sale and lease back of property than acquisitions, and he questions the retailerâ€™s ability to achieve targeted growth while maintaining high margins.
Macquarieâ€™s Greg Dring is looking to what, if any, personnel changes will be made, and what will be done about the Coles renaissance and funding of future growth.