High food prices may be helping supermarket operators.
Australia's Woolworths, the second largest supermarket operator in New Zealand, today reported sales here increased by 10.6 percent in the June quarter, although only 2.2 percent when normalised and an extra week's trading is excluded.
Comparable sales rose 3.5 percent, which Woolworths said reflected tighter macroeconomic conditions and a decline in the growth of the overall market. The company reports profits next month.
Yesterday, Statistics New Zealand reported food prices in the year to June leapt 8.2 percent, the highest rise in 18 years.
Woolworths bought Progressive two years ago and runs the Foodtown, Countdown and Woolworths brands, whose combined sales rose 7.3 percent in the June year to $4.9 billion.
Chief executive Michael Luscombe said the New Zealand operations were off to a better start this new fiscal year despite his earlier comment that there is "no doubt that New Zealanders are doing it tough", as weak economic conditions persist.
Mr Luscombe said economic cycles come and go and he believes that New Zealand will recover. "We want to be ready for when that happens," he said.
Woolworths said its overall food inflation for the quarter in NZ was 4.6 percent, an increase from the 3 percent experienced in the third quarter, "reflecting increased price pressure on certain products in perishables and bakery and the ceasing of price deflation in produce". Sales growth has declined from 9.9 percent in the first quarter, 5.7 percent in the second and 6.2 percent in the third.
Australia's biggest retailer reported group sales worth nearly half of New Zealand's GDP. Sales including NZ, for the 53 weeks ended June 29, rose 10.7 percent to $A47 billion (NZ$60 billion). Mr Luscombe said fiscal 2008 earnings before interest and tax (EBIT) were expected to grow faster than sales while net profit is expected to grow in a range of 21 per cent to 25 percent. On a normalised basis, which removes the impact of the 53rd week, sales were up 8.7 percent.
Woolworths has been taking customers from rival Coles, which is undergoing a major facelift under new owner Wesfarmers, which has said it will take about five years to turn around Coles. Mr Luscombe said trading in fiscal 2008 has been extremely rewarding with the business performing well overall. "The significant re-investment in each of our businesses will continue to drive future growth," he said. "These key investment initiatives include the rollout of our 2010c format stores in supermarkets and our new format BIG W, which are both progressing well."
Woolworths is still awaiting a Court of Appeal decision on whether the Commerce Commission can both Woolworths and Foodstuffs from making takeover bids for The Warehouse. New Zealand-owned Foodstuffs and Australia's Woolworths each have 10 percent stakes in The Warehouse and successfully went to the High Court to overturn the commission's decision to block any potential takeover. The Commerce Commission appealed that decision and the court case was completed in early May. Interested parties expected a decision last month.
Group supermarket sales rose to $A40.313 billion in the year, to be up 8.3 percent on a normalised basis. Sales for the Australian food and liquor business climbed 9.9 percent to $A30.5 billion in the year, with comparable sales up by 6.3 percent. Woolworths opened 30 new Australian supermarkets during the year to bring its total to 780 Australian supermarkets, and 89 Dan Murphy's liquor stores.
Woolworths also owns the Dick Smith electronics chain. Fourth quarter sales in consumer electronics rose 16.3 percent, boosted by 5 new store openings in the quarter. Comparable-store sales rose 3.8 percent.