By Ian Neubauer

Woolworths has defied the world financial crisis by delivering an 8.3 per cent rise in food and liquor sales for the first quarter of the 2008-09 fiscal year compared to the same period last year.

Woolworths attributed the strong result to capital work investments geared to maintain trading momentum. The retailer plans to invest just under $2 billion dollars this year for the launch of 162 new stores and 268 store refurbishment projects.

It is part of what The Australian Financial Review called a ‘counter-cyclical approach’ that runs contrary to the cost-cutting policies of other retailers and will theoretically help Woolworths capitalise on renewed consumer confidence when the economy revives.

“Once you slow down, getting it started again is very expensive business, so it’s cheaper to keep it going rather than let it slide and start again,” said Woolworths managing director. “When it slides and you lose customers, you really have to spend a lot more money to get them back through the door.”

Woolworths’ result compares strikingly to that of its competitor, Wesfarmers-owned Coles, which reported sales growth of just 1.3 per cent for the period.

But Woolworths’ hotel and gaming business has not fared as well. The retailer has experienced flat sales growth in the sector that it blames on the impacts of tighter discretionary spending and smoking bans. 

“We are mindful that discretionary spending continues to be influenced by macroeconomic factors and will be influenced by the recent events in global financial markets,” Luscombe said.

“Subject to the uncertainty these factors create, we maintain our sales outlook for the full year where we expect sales from continuing operations to grow in the upper single digits.”

Woolworths shares were trading for $27.74 at midday today (October 22) compared to $26.39 seven days ago.


The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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