Quake, floods trigger Woolworths earnings downgrade

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Sales at New Zealand supermarkets owned by Australia's Woolworths Ltd rose 4.1 per cent to $ NZ2.18 billion in the 27 weeks to January 2.

Woolworths, which operates the Countdown and Woolworths supermarket brands in New Zealand, where it has half the market, also downgraded its earnings guidance.

The grocer cited uncertainty related to the Christchurch earthquake as one of the reasons for the downgrade, as well as floods in Australia, lower consumer confidence levels, inflation, interest rates and global economic conditions.

It is forecasting a 5 to 6 per cent rise in first-halt net profit and a 5 to 8 per cent rise in annual net profit. It earlier expected annual profit to rise between 8 per cent and 11 per cent.

Chief executive Michael Luscombe said the company had had solid results in its New Zealand business.

Second quarter sales in New Zealand supermarkets rose 3.5 percent to $NZ1.4b.

"The result was achieved in challenging economic conditions and an environment of low food inflation in New Zealand.

"It reflects the continued success of the improved customer offer in New Zealand as we continue to rollout new format stores, convert stores to the value positioned Countdown brand and improve ranging and private label offers," Luscombe said.

The company owns the Dick Smiths electronic store chain. It said its consumer electronic business in New Zealand experienced significant price deflation and sales decreased 4.3 per cent for the half and 5.9 per cent in the second quarter from a year earlier.

Overall, Woolworths' first half sales, excluding petrol, grew by 3.8 per cent in the first 27 weeks to January 2. The Big W chain of stores posted a 2.8 per cent fall in sales.

The company continued to work on increasing online sales across all of its retail trading divisions, and said online sales increased 75 per cent during the first half.

The Woolworths statement comes at a time of mixed results for retailers, with Kathmandu and Michael Hill reporting higher sales and The Warehouse reporting lower sales in the Christmas and New Year period.

Retail sales rose a seasonally adjusted 1.5 per cent in November from October, boosted by rises to vehicle and fuel sales, Statistics New Zealand (SNZ) said on Friday.

Core retail sales, which exclude the vehicle-related industries, slipped 0.2 percent in November.

Supermarket and grocery store retailing fell 2.8 per cent in November, while electrical and electronic goods sales lifted 5.8 per cent, SNZ said.

- NZPA