Australia's Woolworths Posts Sharp Profit Rise Despite Gloomy Retail Market

Australia's largest retailer Woolworths posted a 24.4% rise in full-year profit, despite the country experiencing its weakest retail sales growth in 51 years.

The supermarket giant said its net profit after tax lifted by almost a quarter to A$2.26 (£1.3bn, $2bn, €1.5bn) in the year to 30 June.

Sales increased by 6.8% across the same period, to A$58.5bn. The retailer recorded 42% growth in domestic online sales alone.

"This strong result comes against the backdrop of challenging retail conditions," said Grant O'Brien, chief executive officer and managing director of the company.

Sydney-based Woolworths opened 73 new grocery, liquor and gasoline stores over the year, helping boost overall sales.

It has been trying to lift revenues by attracting customers with cheaper basic items. Average prices of food and liquor in Australia were 2.9% lower than the previous year, said the company.

Woolworths' main supermarket division, which includes domestic food and liquor stores, reported an 8.7% surge in its pre-tax earnings to A$3.06bn. Its New Zealand supermarket chains saw a 5.2% surge in the pre-tax earnings to A$236.2m.

Given the strong results, the company hiked its full-year dividend payout by 5.6% to $1.33 per share. The company shares closed 2.01% higher in Sydney on 28 August.

Slow Retail Sales Growth

According to Australian Bureau of Statistics (ABS), Australian retail sales saw the weakest pace of growth in 51 years rising by only 2.5% year-on-year till June compared to the same period a year ago.

Growth in the clothing, footwear and personal accessory retailing dropped by 0.2%, and the household goods retailing fell 0.3% over the year, showed the ABS statistics.

"We expected retail conditions to remain subdued in fiscal year 2014 with ongoing consumer caution reflecting cost of living pressures, a flat job market and uncertainty created by the federal election despite historically low interest rates," Woolworths said in its earnings report.

Woolworths is also facing increasing competition from its rival Wesfarmers. Both the companies together hold 80% of the Australian retail market.