Retail giant Woolworths is on track to lift its annual profit by up to seven per cent despite softer than expected first quarter sales.
Chairman Ralph Waters, blamed the softer sales for dragging the company’s share price down in recent weeks.
But he said Woolworths was sticking to its forecast of full year net profit growth of between four and seven per cent.
“The market appears to have drawn conclusions about the company’s outlook that your board does not share,” he told shareholders at the company’s annual general meeting on Thursday.
Shares in Woolworths jumped by more than two per cent after the chairman’s comments.
The stock was 52 cents, or 1.7 per cent at $31.60 at 1231 AEDT.
It has dropped from a record $38.49 in April amid concerns about competition from rival Coles and a disappointing first quarter sales result.
CEO, Grant O’Brien, was upbeat about the all important Christmas trading period.
He said while Woolworths’ second quarter sales were heavily reliant on the next six weeks, the company was encouraged by trading to date.
“Like many other retailers, we have started Christmas marketing and promotional programs earlier to strengthen the festive season’s trading outcomes,” he said.
“These improved sales trends are pleasing given the soft first quarter.”
O’Brien tried to reassure shareholders about Woolworths’ share fall in recent months, saying the retailer had consistently delivered strong returns and had always been a long term growth company.
While there would always be short term fluctuations in the company’s share price, Woolworths had a history of outperforming the market and its peers, he said.
In the past three years, shareholder returns had risen by about 50 per cent while company’s share price lifted 30 per cent.
“Today, I have every confidence that our strategy will continue to deliver growth and solid shareholder returns, with consistent, reliable financial performance,” O’Brien said.
Addressing concerns among some shareholders about perceptions that rival Coles supermarkets were cheaper than Woolworths, O’Brien said fierce competition was driving prices down.
Woolworths food and liquor prices had fallen by about 3.1 per cent in fiscal 2014, more than the 2.9 per cent the previous year.
“Competition will only intensify with the growth of online retail and the expansion of new entrants,” he said.
“We welcome this as it leads to lower prices and greater innovation, both of which benefit customers.”
O’Brien also maintained that while the company’s home improvement business, which includes Masters, had suffered higher than expected losses, he was confident it would become a material profit contributor for the group over time.
AAP
