Australia’s largest supermarket operator, Woolworths, has today announced half year sales of $27.2 billion – a 4.2% increase on last year, or 6% when stripping out petrol sales.

Woolworths Chief Executive Officer and Managing Director, Michael Luscombe, said that volume growth had been pleasing, although lower inflation impacted on sales growth.

“Our Supermarkets achieved solid volume and market share growth whilst experiencing lower levels of inflation in Australia and New Zealand, and the cycling of the anniversary of the Australian Government stimulus payments,” he noted. “We are pleased with this result which reflects Woolworths’ clear focus on delivering sustainable growth. Our business remains strong as we continue to deliver real sales growth above inflation in Australia and New Zealand.”

Australian Food and Liquor sales for the half year were $18.1 billion, an increase of 6.8% (or $1.16 billion). Sales for the second quarter were $9.1 billion, an increase of 5.9% over last year.

The supermarket and Big W operator noted that “very low sell price inflation” had been a key factor in their growth rates being more subdued than recent times.

Comparable store sales in Food and Liquor increased 4.8% during the half and 3.8% for the second quarter. The rate of inflation for the first half was just 1.6%, well below last year’s 4.1%.

“The lower levels of inflation reflect deflation in Produce and Perishables, and zero inflation in Liquor and Proprietary Bread,” the company explained. “The difference between comparable sales growth and inflation for the half year improved to 3.2% up from 2.5% in the first half of the prior year and in the second quarter improved to 2.7% up from 2.3% in the second quarter of the prior year.”

The company maintained that volume and market share had improved in the first half, with their new formats and rewards program being “well received” by customers and ensuring basket size is on the rise.

Online sales

Australia’s major retailers have been coy on the strength of their online operations, with expansion of the service nationwide being slower than many expected, although both Coles and Woolworths made strong moves to enhance their operations last year. And it appears to be working, with Woolies reporting a significant rise in online purchases – albeit of a low base.

“Woolworths has been developing its strategy in relation to its online business across all retail trading divisions. Good progress has been made with online sales increasing 41% for the half,” the retailer advised.

Guidance

“The second half of the year will be impacted by low price inflation and the cycling of the government stimulus packages,” the retailer confirmed. “Discretionary spending levels will continue to be influenced by macro-economic factors, such as interest rates, petrol prices, confidence around employment and consumer attitudes to spending.”

Subject to the extent of the impact of such factors, the company reaffirmed guidance for sales growth in upper single digits and net profit growth between eight and 11 per cent.

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